[osuja]

on the table the total market value for the equity share for 2014 was given i think about $55m or $58m and the number of the shares in unit was 12000 was given when u divide u u have ur po which was around $55.m/ 12M shares = Mkt price per share of $4.58

so right issue will then be $4.58 x (1- 0.2) =about $3. something i cant remember that was the procedure which i think was right

[osuja]

8000 invoice means d same as 8000 order quantity

[osuja]

when the disposal proceed is less than the value u have on the column for the asset e.g the car , then it is called balancing allowance. So be cos the entire car was sold, the car cease to exit anymore hence must be writing off from the column and all the value must be taken to the capital allowance column as an addition .

Note this wen an asset is sold and u have a loss it is called balancing allowance

Balancing allowance only occur on cessation of business (very important)

But if it is sold for profit , then it will be balancing charges and this figure will be deducted from the total capital allowance column and also taken to adjusted profit table for tax purpose

[osuja]

Q. if changing the capital structure of a company can lead to a reduction in its cost of capital
and hence to an increase in the value of the company
i used the M and M theory to Explain the question .
m&m with no tax No changes in Npv hence shareholders wreath not increase
M&M with tax will increase as a result of tax interest tax deduction Npv will improve.though the the theory has it limitations such as tax exhaustion

[osuja]

9.18%

[osuja]

Pv @ 12% NPV = +3253
PV@7%NPV =+4803

EOQ current policy =4954
revised policy = 3328

net savings using the EOQ = $1626
discount settlement current purchase policy at 60 days
payable balance = $74958
finance cost @ $3748

revised policy with settlement discount

discount #4560
finance cost $1874

net value $1062

Invoice discount and factoring were also sweet to write on.
d. objective of working capital management i guess was profitability and liquidity with more explanation

question 2
cost of equity Ke: 13%
CAMP better than DGM be cos of it advantages
DGM is mostly base on assumptions.
cost of debt Kd 5.19%
WACC 11.4%

project specific cost of capital
Asset beta Ba = 0.841
Equty beta Be =1.037

cost of equity using the CAMP for the new project =9.18

Note i might be wrong this are the ones i could remember but overall it was a good exam . the theories were very good and easy to pass . but time constraint

Thanks you sooooooo much John .
you are man

[osuja]

hey guys anybody that got wacc as 11.27 or 11,2 got it right
cos the ke =12.1%
kd is 4,6%, u can use dcf of 3% gives u positive NPV of 5.06 and dcf of 5% gives negative NPV of (1.3)
kp is 10%,
and the cost of bank loan Kd is 0-04* (1-.0.3) = 2.8%

[osuja]

Hi prof,
My question is on when calculating for cost of debt redeemable .

if i decides to use DCF 5% and 10% to calculate for the NPV , deriving the IRR lets say 8.672% and the textbook decides to use DCF of 10% and 20% deriving a result of 8.333%

Hence my question then is does it make any difference or will the answer be acceptable by the examiner ?

pls help cos am confused.

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