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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Chakula Co
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??
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 🙂 )
March/ June 2021 sir
You are correct in what you wrote 🙂
Thanks a lot sir
You are welcome 🙂
