Dear Sir Moffat,
For part (c) of the question, in the answer, how to get to $60m (amount of MBO funds needed to pay shareholders) ?
And also for part(c) at the explanation of the answer, how 61% is calculated ?
Thank you.
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Doric (2013 pilot exam) BPPQ30
6y ago#1For your first question, there are 100M shares in issue. The current market value is $0.50 per share, so with a premium of 20% they will need to pay them $0.60 per share. So a total of $60M.
For your second question, the estimated value is $461M. The funds invested are $286M.
So the excess is 461 - 286 = $175M.
So the value is 175/286 = 61% above the funds invested.
Got it, thank you sir
Dear Sir Moffat,
Doric co is a very tough question, can I ask you one more question regarding to part (c) why is the the annual depreciation of the NCA is calculated based on the estimated realisable value instead of the carrying amount?
Is it still correct if I calculated based on carrying value?
Is it because the asset must be impaired ( CV should not be more than recoverable value) when own by the new management?
Thank you.
6y ago#4It is an assumption (as the examiner has written in his answer) that the asset has been impaired, but they don't have to. So if you had calculated it on the carrying value then you would still have got the marks :-)
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