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appendix1
idon’t quite get it the defination of free cash flow to equity is it the equity value of the company
As the answer for the combined comany what’s the difference of 76.5 and 922.5 mean
I think they should add 922.5 first then substract 76.5- Topics: 16
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I recalculated the answer of the combined company part it’s wrong I don’t get 451.5 at all so first part of the equation is so much smaller than 12000+922.5
Free cash flow to equity is the cash available for shareholders.
The total free cash flow to equity of the combined company is the total of the individual companies free cash flow plus the synergy benefits.
This is multiplied by the PE ratio of 7.5 to get the total equity value.The 451.5 is definitely correct – you need to check your arithmetic again 🙂
I recorded lectures working through the whole of this question. You can find them linked from this page:
https://opentuition.com/acca/afm/afm-revision-lectures/
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