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Doric (2013 pilot exam) – BPP practise and revision kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Doric (2013 pilot exam) – BPP practise and revision kit

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • August 9, 2021 at 10:46 am #630887
    aamir2111
    Member
    • Topics: 123
    • Replies: 85
    • ☆☆☆

    Dear John,

    In requirement C of the subject question, BPP’s kit states that the amount the MBO funds need to pay shareholders is $60m, which I presume they have calculated it as SC($40M) + Reserves ($10M) + 20% premium.
    My question is, shouldn’t the payment done by MBO be based on the market value of $2.83 per share? Or is it because it is an MBO, we do it based on the book value?

    August 9, 2021 at 4:57 pm #630921
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    The payment is based on the market value.

    However the last line of the first paragraph states that $2.83 was the value three years ago and that the current market value is $0.50 per share.

    Therefore they will be paid 0.50 + 20% = $0.60 per share.

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