[zoe1233]

I just passed my last paper in ACCA, I want to say thank you for all the support from my AFM tutor John Moffat, you helped me a lot and provide me with immediate support every time I reached out to you. I can’t thank you enough for stepping in when I needed the most, I wish you all the best thing in your life 🙂

[zoe1233]

Thank you John, it makes sense now, I have come to realize that sometimes the website does not display my question but it is great that you can see it:)

[zoe1233]

Hi John,

Hope you are well,

I also have another question from 2021SDQ3 Hanwood Co. I am wondering why interest saved, return from investment in NCA and CA that are incorporated in PAT are not transferred to reserves in the Balance sheet?

In this case, I cannot find any clue suggesting that CEO is looking for a Balance sheet showing immediate impact on sales of children’s division only.

Thanks in advance!

[zoe1233]

Thanks John! I got it!

[zoe1233]

thanks so much, I now get the answer:)
have a nice day ahead!

[zoe1233]

John, I meant to ask 2022 afm exam answer, not the question paper.

[zoe1233]

Thanks John, appreciate it!!

[zoe1233]

Got it John, thanks so much!

[zoe1233]

regarding question 3, I agree that there is a lot of changes so the cash figure will not remain as 7.6 in 2016. I am wondering whether we could calculate the cash figure itself from the information provided other than calculating it by balancing the figure?

In a(i), cash figure is solely calculated using the information provided, I am unsure when to use balance method and when to calculate the figure for cash?

[zoe1233]

thanks, John, I have a further question on that
1) It makes sense that the retained earning is the net increase in cash, so the double entry becomes
dr. share capital 10m
cr. cash 7.6+2.4m=10m

but since 2.4m is spent on share repurchase, I am wondering why it will still remain in the retained earnings on BS, is it because of the following entries such as 2.4m is added to the retained despite 2.4m being spent?
dr. cash 2.4m (spent)
cr. retained earning 2.4m (remain in RE)

thanks again:)

[zoe1233]

I got it, it makes sense now, thanks John!!

[zoe1233]

Thanks John, it makes sense now 🙂

[zoe1233]

sure thing John! Thanks again!

The question is from Cigno Co (2015DecQ1) where FCFF calculation is used to calculate the total value to Anatra Co after unbundling, I am wondering why would the FCFF calculation result and unbundling part not being the value attributable to Cigno Co as Anatra Co is acquired by Cigno Co, but rather the total value to Anatra Co?
It makes sense to me for the value attributable to Anatra Co’s shareholders, but I don’t understand why the value attributable to Cigno Co is the remaining part of 37478 – 37350. I thought it is 37478.

—–

Suggested solution: Total value of Anatra Co following unbundling of equipment manufacturing business and absorbing medical R&D business: $5,594m (appendix 1) + $31,884m = $37,478m (approximately)
The value attributable to Cigno Co’s shareholders from the acquisition of Anatra Co before taking into account the cash benefits of potential tax savings and redundancies = $128m

——

I did 2020MarchQ1 Westparley where the result of FCFF calculation of $15872m is included as a part of the value attributable to the bidding company.
——

Suggested solution: Value attributable to Westparley Co shareholders = present value of cash flows + proceeds from sell-off + value of synergies – value to Matravers Co’s investors = $15,872m + $5,058m + $1,842m – $20,875m = $1,897m

——

The calculation itself makes sense to me, it is just why the result would not be attributable to Cigno Co.

the result of the FCFF calculation is considered as the total value to Anatra Co after unbundling, how to distinguish whether the FCFF calculation is the result of the value to the bidding or the target company? In the case of Westparley, it looks like it is the value to the bidding company, but in the case of Cigno, the total value to Anatra Co is spread between Antra and Cigno.

Thanks in advance:)

[zoe1233]

sure thing, thanks John!

[zoe1233]

Thanks John, it makes sense now! Have a nice day ahead!! 🙂

[zoe1233]

another way I can think of doing it is as follow:
1) share volume =2263M
2) combined company value = 6720m – 2.09*263 = 6170.33M
3) hence the share value is 6170.33/2263=2.73 per share
4) percentage gain = (2.73-2.5)/2.5=9.2%

this way of doing it resembles John your solution, but it completely ignores the share price of 2.6 given in the question.

I have tried so many different ways of calculating it, but I didn’t quite get it right.

[zoe1233]

Thanks John! it makes sense now for the cash offer!!

I followed the way you did to do the mixed offer, but my calculation is still incorrect, do you mind having a look as well and pointing out the issue for me please, thanks a lot!

mixed offer:

1) share volume = 2263M

2) share price for the combined company = 2.6 * 2263 – 263 *2.09+720 synergy=6054

percentage gain = (6054/2263-2.5)/2.5=7%

Thanks again:)

[zoe1233]

I want to add on that the reason why I used combined company to calculate the answer is that I learned from Selorne Co where the value of Chawon after acquisition = combined company value *share number.

Thanks again!

[zoe1233]

thanks John, appreciate it!

[Author]

Posts