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Calculate the Value attributable to equity in M&A

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Calculate the Value attributable to equity in M&A

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by John Moffat.
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  • March 27, 2022 at 5:08 am #651979
    moheikal
    Member
    • Topics: 5
    • Replies: 0
    • ☆

    Hello John,
    In MJ21 Q1, Estimate of Kawa Co equity value if demerger is undertaken. the Value attributable to equity was calculated as 75% of the total corporate value. Would you please clarify how the 75% was calculated.

    Regards

    March 27, 2022 at 10:30 am #652017
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    The question says that Kawa will maintain its capital structure after the unbundling.

    The part of the business which will become Kama is 24.5% of Chakula’s total equity value and so it 24.5% x 1,000/0.5 x $2.45 = $1,200.5
    Kawa takes the loan notes B which have a value of $400.

    Therefore the equity is 1,200 / (1,200 + 400) = 75% of the total value.

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