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Hi John,
I’m doing this question from the bpp kit.
How in the world did they come up with the revenue of 60 pounds (30 pounds +100%)? I can see nothing in the question that suggests this approach.Note 5 of the question says that room rates are variable cost plus 100% !
oh yes, did see it. My bad! Can you please also tell me why we have discounted the dividend payment using the risk free rate of interest?
I am looking at the original exam question (from December 2008) and there is no mention of any dividend payment.
You are obviously using an older edition of the BPP Revision Kit (the current edition does not include the question Blipton) and maybe they have changed the original exam question. However, given that I only have the current edition, I have no way of knowing whether or not they have changed it.
In the original exam question, it is the remittances that have been discounted and they have been discounted at the nominal (actual) cost of capital, which has been calculated as normal using the Fisher formula.
oh okay. This question is in the latest version of Kaplan kit. Pretty convoluted i must say.
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