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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Dec 2010 q1
Hi sir,
For 2. Unsecured bond holders
can you pls explain the statement “over 87% of the company for a total investment of 210m” and
“The value attributable to them based on perpetuity cash flow is 223m which is more than their investment”
why total of unsecured bond holders investment not 270m but 210m?? And cash flow 223m is less than 270m but not more than.
Im confusing at this part,pls advise,thanks~
Besides,for calculation on proposal 3, the 5% growth is an assumption or got mention in the question?
The perpetuity factors used
0.11-0.05, the 0.05 is that 5% growth??
Thanks a lot~
The question says that profits in the parts division will grow by 5% per year.
The 0.05 is the 5% growth (they are using the dividend growth formula which can be used to get the PV of any growing stream of flows)