[souz]

Hi John,

Thanks for providing all the clarification I asked through OpenTuition. I have passed with 83%. Thank you so much for your wonderful support!!

[souz]

Options has come for section A 50 marks, currency, interest rate and multilateral netting, question 2 was NPV. And restructuring for question 3 . I feel the exam was tricky and time bounded especially question 3 what was asked is more for the time we have .

[souz]

Hi John,

Thanks for your reply.i understood that its because of tax loss carry forward .

Thank you so much for your patience and efforts to help us.

[souz]

Hi John,

Thanks for your reply.
I need a bit more clarification on this.Normally we follow this procedure of subtracting and adding back on FCFE but for NPV calculation we only add TAD.Here in this case we are doing NPV then why should we deduct Depreciation and add back.

Thanks in advance for your valuable time.

[souz]

Sorry John,i didn’t understand that its mentioned that
i) current assets, non current assets trade and other payable will be transferred to the new company (Hence we don’t need to consider this because it will be transferred to new company).Bank OD will be repaid.

II) With exception to Bank OD,Bento has provided financing to Okazu.No liabilities except trade and other payable will be transferred to new company (what I understood is that since its not transferred to new company we need to include here)

or here what they mentioned as new company is the MBO ? if that is the case then its correct.Please help me to confirm this point.
Thanks

[souz]

Hi John,
To be more specific I understood their calculation for taxable profit but as per the given answer the net effect of taxable depreciation is zero because it’s deducted added back . Why is it so? As per normal method we should have added the same rit? Please clarify this point. Thank you so much

[souz]

Thanks for your time , I understood it now.

[souz]

Hi John,
Thanks for your reply.
Sorry I got got to mention that in the last line it’s a negative synergy and by paying premium it’s negative 20565.
For the same question BPP also have negative synergy.

For my understanding when we find the synergy of combined company we remove the debt value rit? We need only the market value of equity because that only shows the real value of company because debt portion is amount owed to outsiders. I used to follow that method.is it correct or do we need to consider total market value sorry I am confused I was following this way long time please clarify me

[souz]

Sir,
I need one more clarification for the same question. I have calculated as below:
Total value of Fodder is 40089 hence MVE- 36080
Total vale of Pursuit Equity is 70,000 (140*.50)
Total value of combined company is 189,070 so the total equity value will be 94,535 (188070/2)
So synergy calculation is = 94,535 -(70,000 + 36,080) = -11545

Premium paid to fodder is 9020 so net benefit to pursuit is =20,565 (11545+9020)

Can you please tell whether I can follow this method?
Thanks

[souz]

Thank you sire didn’t notice it initially ,understood completely .Thanks

[souz]

Thank you so much sir, your effort is much appreciated.

[souz]

Sir,

I have two doubts regarding this question:

1.Depreciation.
In the question they mentioned that the changes in net P&M is as per sales revenue so in the first year calculation I understood but going forward to calculate the net figure why we are not deducting the depreciation provided? (eg as per my calculation 20X5 Opening balance of net P&M is 1103 and depreciation is 165 so year end net P&M is 938 and we need to inflate this as per sales ie 8% so the next year the opening balance will be 1013) Please do help me to understand where I went wrong

2.FCFE – Change in working capital-
Regarding change I working capital they included the cash and short term deposit but actually we need to deduct cash when we calculate the net movement in working capital net working capital, Please clarify me .

Thanking you in advance!!

[souz]

Hi Sir,

I have on more doubt regarding this problem.When the produce the financial position after restructuring the mention total Non current asset as 6000 and 5520,why they are not deducting the depreciation? one more doubt regarding MBO, after finding the value of manufacturing business unit why are they not deducting the payable portion of manufacturing unit which is 20% of 750? Please clarify.Thanking you in advance!!

[souz]

Hi John,

I have a doubt regarding this question, its mentioned the annual reinvestment needed to keep the operation at their current level is equivalent to tax allowable depreciation.I understood this point but in the above paragraph its mentioned that company will invest 1200 m into equipment for its mining and shipping unit. Should we deduct this from free cash flow as it is an additional investment.
Thanks in advance!!

[souz]

Thank you so much sir for clearing my doubt.Its clear for me now.May god bless you!!

[souz]

Sir,
Thank you so much for your time and effort.
So I would like to clarify few point.Please confirm whether its correct.We need to do perpetuity growth formula (DVM Formula) when they say it will grow certain percentage forever.

In that case we need to discount the same to PV if the growth is not at year 1 eg if perpetuity growth is at year 3 we need to do DVM formula and discount the same with year 2 factor.

If they just give one year and mention growth we don’t need to discount to PV because DVM formula itself will give us the PV is my understanding correct?

Thanks in advance!!

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