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Doric MBO

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Doric MBO

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  • August 31, 2019 at 2:36 pm #543965
    AvatarAnonymous
    Inactive
    • Topics: 5
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    • ☆

    Hello

    In the Doric case (about MBO), company value is calculated only on yearly operational FCF. It is properly discounted as perpetuity…but why value of investment of 50M is not taken into account in the FCF i.e. as year 0 expenditure?

    Thank you in advance for your help!

    Regards
    PJ

    August 31, 2019 at 6:15 pm #543975
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
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    • ☆☆☆☆☆

    But effectively the examiners answer does take it into account.

    The 50M is included in the total of the funds needed.

    The very last line of the examiners answer does state that the PV of the future flows is in excess of the total of the funds needed.

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