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There’s no interest charge in the income statement so the only thing you can assume is that it’s purely equity funded so the WACC must therefore be 9% …
net operating profit 386
Less Tax: (115.8)
Add non cash exp 4
=274.2
Less 1294@9% (116.46)
=157.74 is EVA (158 per exam answer)Budgeted Revenue for Private Patients having ear operations:
1. Work out number of patients
(15 Wards x 8 Patients x 365 days)/ 3 night stay =14600
14600@80% Capacity utilisation= 11680 patients
11680x 50% are private x 30% having ear operations=17521752 are Private patients having ear ops paying £3000 each= £5,256,000
Then you just do the same for all combinations of operations & patients
Hi thanks for your reply.. I was probably not really clear in my other post but when I mentionned they are combining exemptions I meant different types of exemptions ie the marriage exemption and the annual exemptions are being combined. I have looked further into this myself also, and it seems that only the small gifts exemption cant be combined with the annual exemption to increase a gift to the same person but for some reason they allow the mariage exemption to be combined ( It is just not clearly phrased on the HMRC& website).
Thanks again for the reply
Hello, I find this area a little confusing myself…but If you are talking about Example 1.4 then I believe it is because there is more than 1 rate of inflation therefore you wouldn’t be able to calculate a real rate of return. If you were calculating a real rate then you’d have to use the following formula 1+Nominal rate/1+rate of inflation. If there were a single rate ie 5% that applied to everything then I believe we could use the real rate.
I think you’ve answered your own question! IC is the interest rate of the country C do if the interest rate in C was 5% and the interest rate in B was 6% then it would be F=Sx(1+.05)/(1+0.06). You wont actually know what to put in as the interest rates unless it tells you in the exam! I hope I’ve answered your question.