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Oh sorry, I wrongly assumed it was a receipt

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Thank you sir

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Oh phew, thank you

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Thank you sir, I understand now

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Is it because when assuming that only equity is used, the asset beta is equal to the equity beta?

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Oh yes I missed that, thank you

Also why does the all equity financed discount rate use asset beta instead of equity beta?

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Thank you sir

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Oops, I’ll take note of that next time

Thank you sir, I understand it now

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Thank you for your prompt reply. So the $5000 was from a bank loan that was swapped at the current rate in year 0. At year 3, the government buys back the project for $7500, but $5000 of this $7500, is considered hedged as Buryecs will have to pay $5000 (at the original rate) back to the bank to repay the loan?

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thank you sir, its much clearer now

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Sorry sir, i was in a rush while typing the question and forgot to add in the details. Mar/June 2017 Question 1.
In the calculation of the value foregone by the VCOs, why is the value of their unsecured bonds 4,800m (which is the book value in the financial statements)? I am puzzled as to why the book value is used to calculate the value of the unsecured bonds without considering the interest payments that the VCOs would lose from cancelling the bonds

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Just to clarify, you said 1/r, by that do you mean 1/required return?

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Thank you for your prompt reply sir I understand better now

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Also why is it that the estimated value of the cash flows is not discounted if the cash flow is from the end of year 1? Shouldn’t the value be {[(435×1.08)/0.1]x0.909} ?

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Thank you sir

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And also if royalties are deducted from the first cash flow, why isn’t the contribution from the components deducted as well?

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Thank you sir, I now understand the need for the two cash flow statements and why the royalties were added back into the cash flows in the home country. However I’m still confused as to why the royalties were deducted from the foreign country, since the company would be receiving the royalties and is therefore not an outflow?

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Oh I see thank you sir

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Thank you sir

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Oh i see now, thanks again sir

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ohhhhhh yes now it makes sense, thank you sir

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Thank you for the prompt reply sir, I understand fully now

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Thank you so much sir, I will listen to the lecture again

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