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Good afternoon Sir ,
I have two doubts regarding these questionsChrysos Co –
1)
Why depreciation is not added back when calculating value through management buy out ? Is it because it was written after tax net cash flow in
question rather then free cash flow?Chrysos vs Cigno Co –
Value through unbundled1)
Sir why value through unbundling is added in Cigno Co but not in Chrysos in estimating value to equity holders?
If Antra is unbundling the sell off is being added to it’s value but when Chrysos is unbundling it is not being added to it’s value .1. The question says that ‘the annual reinvestment needed to keep operations at their current level is equivalent to the tax allowable depreciation’.
So although depreciation itself is not a cash flow, there is a cash outflow of the same amount.
This is what the current examiner normally does, which is why I stress and explain this point in my free lectures.
2. Cigno is acquiring Antra. Chrysos is not acquiring anything – it is simply selling off part of its business.
Ohk .I get it now . The investment equivalent to depreciation assumption is also applicable on unbundling and even though unbundling, it add value to the business of target .
Thanks
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