[Marianne]

Great, thank you for such a quick response!!

[Marianne]

Perfect, thanks Ken!

[Marianne]

Hi Mike,
Thanks for getting back to me. Unless I’m missing it. This is the answer

FV of net asset
Shares 9000
Ret ear 19000
FV 3000
DT Liab (1000)
Total 30000

Cons ret ears workings
Per Q 27000
Less Pre acq (19000)
8000
depn of fv (600)

Then that’s it they get “our share” of 7400

Unless I’m missing something… ??

[Marianne]

I think I may see where I am looking at it wrong, I thought $740k was period specific but it just looks like that is costs incurred to date not actual period specific costs.

[Marianne]

Hi Mike,
When I was trying to work out the profit recognised, I had calculated it as follows
2.8m x 35% = 980
P specific (740)
1.4m x 35% (490)
Loss (250)

Why did they not get a percentage of the revenue and total costs?
Am I reading the question wrong?

[Marianne]

Hi Mike, I have read and watched everything up to chapter 9 and was practicing the mini questions then.
Sorry I hadn’t got to those notes.

Thanks again for your time.

[Marianne]

I passed with 67% second attempt, thanks open tuition!

[Marianne]

Hi John,
Just to clarify one other thing. If in the question it says: the dividend is about to be paid would we take this as D1 when using the dividend growth model? And if it has just been paid is it the D0?

Thanks

[Marianne]

@johnmoffat said:
Yu Huey’s answer to the first question is correct.

With regard to the second question:

The dividend growth rate is fourth root of (24/20.51) – 1 = 0.04, i.e. 4%
The shareholders required rate of return = 3% + (0.5 x 8%) = 7%
The dividend just paid is 24c

If you put these in the dividend growth model formula you get a market value per share of $8.32. Therefore a total market value of 4M x 8.32 = $33.28M

Hi John,
Just to clarify, there is four years growth because the dividend has just been paid. If it were about to be paid would it be 3 years growth.
I know this sounds like a really stupid question but I just want to make sure I have it clear in my head!

Thanks in advance!

[Marianne]

I actually think I got it now. Would you get the Fourth root of the fraction because it is only inflated for 3 months?

[Marianne]

HI Skgoh5101,
I am not sure if you figured out the answer but this was baffling me as well .The scrap value is an additional inflow. I was netting the €20,000 off each other in year 4 when the total cash inflow should be €40000

[Marianne]

Hi John,
That is no problem, I will check that out. Thanks!

[Marianne]

Passed with 58% couldn’t have done it without Open Tuition!

[Marianne]

Passed and got 68% Yay! Happy with that 🙂

[Marianne]

I’ve just realised I’ve done the same thing! I’m pretty sure they give marks for calculations and workings though.. I doubt if they award no marks at all?

[Marianne]

I couldn’t understand how they got the answer, but I see you now answered it on someone elses thread.

Thanks

[Marianne]

When I see it now, I don’t why in the world it was confusing me so much, as up until now I had understood Target cost gaps. Thanks very much John for all your help!

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