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Hi, in this question,
can i find the value of combined company to be (31884+5594-9000)
and then find out the value created as value of combined company- (21000+36000)
and then deduct the premium of 7350 from this to find the value attributable?isnt this how we usually do value remaining, value of combined co – values of the individual companies and then deduct the premium for it to get the reamining value, why is this q done differently
And also the WACC how is it for the combined company sales revenue etc is of anatra
also if the division was sold for funds rather than value, will those funds be added same as we did for value of sell off or will it be deducted from value of combined company? Also does it being a demerger or MBO have an impact on how this value of combined company is calculated?
The value of Anatra’s business is 31884 + 31884 = 37478.
The current value of the business (equity + debt) is 30,000. In addition there is the premium of 7350, and so the total value attributable to Anatra’s investors is 37,350.
The remainer of 37478 – 37350 = 128 is attributable to Cigno’s shareholders.
If your third question is related to the WACC of 9%, then this is the WACC for the combined company as per appendix 2 of the answer.
The value of the combined company is based on the future cash flows.
if the division was sold for cash, would we have added it to find the value of the combined company?
sorry im a bit confused, so we will add the division thats being sold off in which cases exactly? When its only being sold off not for cash? so if the company is being valued using FCF or straight up recieving cash it wont be added to find the value for the combined company but if its valued using any other method like P/E, it will be added, is that right?
The value is the PV of the future cash flows, or if using a PE valuation will be the PE multiplied by the expected earnings.
Have you watched all of my free lectures, including those working through several past exam questions?
i understand how to value it i’m just unable to understand when to add it to find value of combined company
All of our free resources are linked from our main Paper AFM page: https://opentuition.com/acca/afm/
(Given that you have not watched our free lectures, I do assume that you have worked through a Study Text from one of the ACCA Approved Publishers? Which one did you use?)
and i have not given FM so my basics are a bit shabby. Anyways sir, thank you so much for the help.
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