Sir
After watching your lectures again and the one in particular about the cost of capital to be used in the valuation, I believe that number 2 of 3 is the one to use being the same WACC as existing as I do not believe there is a change in gearing and the business risk remains the same. However, I am not sure if one company has existing gearing and the other not like in this question...does that mean there will be a significant change and I must therefore use adjusted present value??
Regards
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Acquisitions and mergers mock 1 Q3
7y ago#1I am not sure I am looking at the same question as you are. Mock 1 Q3 in the edition of the BPP Revision Kit that I have is called Minprice Inc, and discounting it not relevant.
Maybe you have a newer edition - I am still waiting for the latest edition to be delivered to me.
Minprice and savelot....I must be well off point
It gives a choice of cost of capitals to use in the Dividend growth model cost of equity or WACC. So i am referring to your lecture, the 1,2 and 3 (that isn't used anymore)
7y ago#4They are using the dividend growth model to estimate the market value of equity.
The dividend growth model uses the current dividend, the dividend growth rate, and the cost of equity.
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