[genty]

Also while calculating dividend growth they’ve used Ke to discount it, would it be wrong if I did it on wacc if mv of debt was given?

[genty]

Thanks

[genty]

In part b, to calculate the premium under the excess earnings method, why have they subtracted 20% of the capital employed from 373?

And since in the question it’s mentioned “based on after tax earnings” why have thy used 373 and not 373×80% to arrive at the annual premium?

[genty]

Relating to method 2 of the same question, would the share price of combined company not change from 9.24 after the acquisition of strand?

And why have they not multiplied the number of shares given up by the shareholders of strand. As in they should have done( 5.95-4.77×2) ÷(4.77×2) right? Since its 1 hav share for every 2 shares of strand

Thanks

[genty]

Hey John

For the same question, why have they reduced the retained earnings by 17.5?

Thanks

[genty]

Thanks a lot (:

[genty]

In the Pursuit Co (June 11 A) they have calculated the free cash flows to the firm using WACC, but they why haven’t they subtracted the value of debt to find the value of the company?

[genty]

Thanks a ton, John. I’d make sure to watch the videos ?

[genty]

What is the best model that I can possibly use in this question?

[genty]

@pinkyjovin123 said:
In Mcq something about parent….
Which should not be included in the csofp.

Is it parent co shares not trading in the public market and there was one more.Dont remember.Can anyone remember??We hAve to choose two..Not sure about the one I chose..

@pinkyjovin123 said:
In Mcq something about parent….
Which should not be included in the csofp.

Is it parent co shares not trading in the public market and there was one more.Dont remember.Can anyone remember??We hAve to choose two..Not sure about the one I chose..

yeah that one and parent is also a sub of another company?

[genty]

@dreamscars said:
Proxy company’s debt/debt+equity ratio was 0.25 so i assumed that debt is 25 and equity is 100 – 25 = 75.

you have to ungear the proxy company’s equity beta to get the asset beta so

2.0(75/75+25) = 1.5 (Tax is ignored on this question)

And regear it with the capital structure of the investing company (100% equity financed so no debt here) 1.5(100/100) = 1.5

and use CAPM to calculate the discount rate with equity beta of 1.5

I thought they had given the target beta as 1.2 :/

[genty]

How much does the bank have to pay company, annual interest is 4%. options are 45, 50 k. I don’t remember the rest.

what’s the right one?? I guessed it as 45 k

[genty]

There was an Mcq where equity beta of one company was 1.2 the target company’s beta was also given so did you take 1.2 while calculating Ke??

[genty]

@misschile100 said:
Yes I did inflate them

Just for clarifying. I hadn’t known there were two ways of doing this one, one of them is the one you mentioned. The other one, the one that I’m familiar with is to calculate contribution without inflation, then discount the cash flows for each year using real rates. It’s a win win situation for us. Yipeee!!

After reading your comments I was afraid that I might be wrong so I confirmed with dec 2011 paper.

[genty]

@misschile100 said:
What do you mean? They said the figures increase each year by general inflation rate

You only inflate it if they have given specific inflation like, ‘ inflate Sp by 2% every year’ in the q. I guess. But din’t worry you’d probably get marks for it get stuff like taxation.

[genty]

@evilozfon said:
in npv calculation how did you guys inflate the S.P and costs by :-
1) 4.7% + 4.7% for second year
or
2) value x (1.047)^n

which did you use?

You don’t inflate the two if they only give general inflation.

[genty]

@ehsanshah said:
For last question I calculated WACC before taking in account issue of new finance.. than I calculated taking it into account..

what you guys did?

That’s the right way to do it I think. Unfortunately for me my laziness got in my way and I thought I would calculate WAcc without taking the new finance into account at the end but I forgot!!!?

[genty]

Thanks! I’ll make sure to watch the videos for the next papers next sitting.

[genty]

@aagshin said:
Dear all, I wrote all exam with blue pen. Is this a serious problem??

They might have to correct your paper the old school way. Their system can’t read non black ink. I heard so…

[genty]

And third to last being a

[genty]

@mdarifansary said:
i have done this in exam….dont know how much they will be correct???????
can u guys help me out??????????

1 b
2 cant remember
3 a
4 a
5 d
6 b
7 c
8 d
9 a
10 b
11 d
12 a
13 c
14 b
15 b
16 c
17 a
18 a
19 c
20 c

I remember getting the last one as C 🙂

[genty]

@hermain97 said:
For ratio qn what did u guys write for part b 4 marks

look at cash flows not profits. Profits can be manipulated

look at the depreciation technique, some companies may use straight line nd some reducing balance this could lead to a difference in plant and machine valuation

whether they revalue their land every year

I don’t remember the last one that I wrote.

[genty]

@pinkyjovin123 said:
In Mcq something about parent….
Which should not be included in the csofp.

Is it parent co shares not trading in the public market and there was one more.Dont remember.Can anyone remember??We hAve to choose two..Not sure about the one I chose..

yeah that one and parent is also a subsidiary of another co.

[genty]

How did you folks solve Q 3 convertible loan notes?

I did something of this sort

25÷5= 5 shares
7500- share premium (5 k ×1)
5000- share capital(5 k ×2.5)

total cash from rights issue= 12500
12500× 40% – loan
12500 ×60% equity

[genty]

@pinkyjovin123 said:
Impairment gets effected in Nci,goodwill and retained earnings.I am I right???(MCQ)

I the option that said all of the above

[Author]

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