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- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- May 22, 2018 at 11:02 pm #453457
1. Where can I find redeploy question maybe in your lecture notes( ? because all of my textbook and revision kit from Kaplan the only question that I was not able to find among types of real option was the option to switc/redeploy (maybe it’s out of the syllabus ?) (also I was not able to find it in ACCA technical websites or in opentuition p4 lecture videos as well)
2. Last time I have asked why interest is deducted after operating profit and you have commented as per below
“The only place where our notes say that debt interest is deducted after calculating the free cash flow, is where we are calculating the free cash flow to equity.
Tax is always calculated on the taxable profit after interest – this is basic Paper F6.
However in normal free cash flow calculations (and hence normal project appraisal) we do not bring in the interest (or the tax saving on the interest) because the after tax cost of debt is accounted for when we discount at the WACC.
It is only when calculating the free cash flow to equity (as we are in Lamri) that we do subtract the interest and the tax saving on the interest.”Sorry but I still do not understand this part. formula in opentuition deducts interest after free cashflow while in the question while in the LAMRI CO question it deducts the interest after the operating profit. I’m still confused about this part john……………
May 23, 2018 at 8:14 am #4535071. There is no redeploy question in our lecture notes. The question in Kaplan is almost certainly the only exam question there has been on this.
2. Lamri is asking for the dividend capacity, which is the cash available for dividends – after interest and after tax.
Interest is allowable for tax, so it makes sense to subtract it from the profit before calculating the tax. By all means subtract it later – it doesn’t matter how you lay it out – but then make sure you are deduction the interest net of tax if you do this.May 23, 2018 at 10:57 pm #4536751. In Kaplan revision kit, i have certainly solved all revision kit questions and the textbook questions however i was not able to find the question for the switch or redeploy question…. is there any way i can see practice the question ???
2. So that means i can also use the format laid out in the opentuition page 80 but i just need to make sure that the taxation amount do take into consideration of the debt interest paid.
Is it correct ???May 24, 2018 at 6:31 am #4536991. I really cannot remember when it was asked. I will have a look and if I find it I will let you know.
2. Correct 🙂
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