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In addition, the model solution in 1b in evaluating the acquisition does not reflect on the fact that there is no mention of tax in the financial evaluation? They seem to mention sensitivity analysis but correct me if I’m wrong, to assess the sensitivity of revenue, we take NPV over the after tax present value of future revenues? So NPV/pv of after tax revenues?
is setting targets for managers according to their areas of responsibility performance measurement or management? when a question refers to performance management, is it okay to talk about the information systems needing to be good to provide reliable accurate and timely data so that performance can be managed?
also, is it because export division is a profit centre and therefore has no control over depreciation since it does not invest? If we were appraising a division which was a profit centre, and not the divisional manager, would be still deduct depreciation in calculating net profit ? the paper is march jun 2017 ? thanks
Hi Sir
thanks once again for your help.
Does the amount we gain or lose on the contract in the marked to market process depend on whether we have bought or sold futures to begin with? So if we have bought contracts to begin with and the settlement price goes down 1 day after we have bought them, we make a loss? and if we have sold futures, we make a gain or I assume nothing happens?quote from answer ” High interest rates will be attractive to international investors,
as they can get higher returns and may lead to the Y$ becoming stronger relative to other currencies.” Don’t high interest rates in comparison to other countries mean a depreciation of the currency as per interest rate parity?
Thanks for all your helpsir there is no mention in the answer of the fact that duration measures the average amount of time to pay back the present value of the project. Project beta has a lower duration. Secondly, it measures the sensitivity of the present value to changes in the discount factor. There is also no mention of this. Please could you explain why this is not relevant for this question.
forgive me for bombarding you but i think i have worked it out. as per the question, Westparley is only using the matravers home stores together with the online sales from its home business to calculate the revenues going forward used in the free cash flow method or pv of cash flows. This means that we are not working out the combined cash flows of the new company since westparley sells food and household items in westparleys stores for which revenues have not been provided to us. Therefore we don’t need to take off the market value of equity and debt of westparley in the calculation. is this correct?
think i made mistakes above. You might be able to see my point with fodder co. pursuit is aquiring fodder and we are asked whether the acquisition would be beneficial. In this case we have found the value of the combined company using free cash flow to firm and taken away the market value of debt and equity ie the firm value for both fodder and pursuit to calculate the synergy benefits. we also pay a premium to fodder for acquiring it and we get a net benefit to pursuits shareholders. So my question is, this is the net benefit. why do we not take away the market value of debt and equity for westparley? Is it because in westparley they are asking for total value and not the net benefit? am i correct in saying westparley is not beneficial for shareholders?
hi thanks for your response.
I have seen questions where it asks what is the maximum premium the acquiring company would pay for the target company and in this case the extra premium ontop of the premium they are already paying is 1897.
Another questions asks whether the acquisition is worthwhile to the shareholders and in this case, since it is a positive value (+1897), the acquisition is worthwhile. However, i have not seen it phrased as total value to the shareholders. Please Correct me if I am wrong.
If you know off the top of your head another question, please let me know. Tutors in the past seem to know all the questions since the material is repeated. Thanks once again for your kind help (you are quick to help us all out).
