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D20 Q1 Kingtom co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › D20 Q1 Kingtom co

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by John Moffat.
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  • September 25, 2021 at 12:29 pm #636475
    humai
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    Sir this question is a case of change in capital structure, but where question says that Kingtim Co plans to invest $60m in non-current assets for the outdoor shops. Asset beta of similar companies in outdoor retail sector is assumed to be 0·88.
    So is it also a diversification case?

    September 25, 2021 at 12:32 pm #636476
    humai
    Participant
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    Also its written in the question that She is therefore proposing to expand the company’s current limited sales of camping products in its garden centres by establishing a chain of Kingtim outdoor shops, selling camping, walking and other outdoor equipment. So does this indicate that it is also a case of diversifcation?

    September 25, 2021 at 3:55 pm #636487
    John Moffat
    Keymaster
    • Topics: 57
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    There is already a degree of diversification because they already sell camping products in their garden centres. By establishing a chain of outdoor shops to sell camping products is in a sense increasing this diversification (you could mention this, but it is not really particularly relevant to what is required except insofar as obviously the overall asset beta of the business will change).

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