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57-vogel

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › 57-vogel

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • November 29, 2021 at 7:48 am #641973
    mehazia
    Participant
    • Topics: 54
    • Replies: 6
    • ☆☆

    Tori Co’s current value = 11.25 × ($23.0 × 0.8) = $207.0m
    Value created from combined company
    ($126.56m + 0.5 × $23.0m × 0.8 + $7m) × 10.35 = $1,477.57
    Maximum premium = ($1,477.57m + $150.42m + $4.81m) – ($1,140m + $207.0m) = $285.80m

    please explain from where we got 23 in the 1st line. and then what happened in value creation step

    November 29, 2021 at 8:54 am #641983
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51585
    • ☆☆☆☆☆

    $23M if Tori’s per-tax profit as is given in the question. (It is multiplied by 0.8 because the tax is 20% and by 11.25 which is the PE ratio).

    The maximum premium is the new MV of the combined company (1477.57) plus the value of Ndege (150.42) plus the sale of assets of C (4.81), less the value of the two companies before they combined (1140 and 207).

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