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AIR QUESTION 46 BPP

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › AIR QUESTION 46 BPP

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • February 23, 2017 at 7:12 pm #373925
    bilalahmad99
    Member
    • Topics: 48
    • Replies: 53
    • ☆☆

    Hello John,
    How he determine the no of shares purchased by ER is 2 Million and thus contributing 1M$. It may be common sense bt I am getting at it. Could you help out pls. Thanks

    February 24, 2017 at 6:35 am #373956
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    Management and employees are investing $4M and since the shares are $0.50 nominal value it means they are taking 4/0.50 = 8M shares.

    Since ER is taking 20% of the shares, it must mean that management and employees are taking 80% of them.

    So 8M shares are 80%, so total number of shares must be 10M and ER take 20% which is 2M. Again they are $0.50 shares, so the amount they contribute is 2M x $0.50 = $1M.

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