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Chakula Co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Chakula Co

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • August 18, 2023 at 11:46 am #690159
    Varun.J.Thakkar
    Participant
    • Topics: 75
    • Replies: 112
    • ☆☆

    Extract from the solution
    ” If the cash payment to Kawa Co’s shareholders is increased to $0·71/share, to bring it in line with the value obtained from the demerger, and the funding is sought from debt financing, then the debt percentage compared to total firm value will increase
    to 53·8% (as shown below):
    $0·71 x 2,000m shares = $1,420m.
    Market value of equity: $2,933·7m, 46·2%
    Market value of debt = ($1,601·7m + $1,420m + $400m) = $3,421·7m, 53·8% ”

    At cash payment of $0.66, MV of equity was 4253-1320= $2933, how can it be the same for cash payment of 0.71
    Shouldn’t the MV of equity be = 4253- 1420 = $2833m??

    I think the solution is wrong…isn’t it??

    August 18, 2023 at 5:10 pm #690174
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Please tell me the date of the exam (although I do have the past exam papers, I cannot remember the name of every question in every exam 🙂 )

    August 18, 2023 at 9:34 pm #690210
    Varun.J.Thakkar
    Participant
    • Topics: 75
    • Replies: 112
    • ☆☆

    March/ June 2021 sir

    August 19, 2023 at 9:21 am #690248
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    You are correct in what you wrote 🙂

    August 19, 2023 at 9:34 am #690252
    Varun.J.Thakkar
    Participant
    • Topics: 75
    • Replies: 112
    • ☆☆

    Thanks a lot sir

    August 19, 2023 at 3:54 pm #690263
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘Chakula Co’ is closed to new replies.

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