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ENNEA CO (JUN 12)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › ENNEA CO (JUN 12)

  • This topic has 9 replies, 3 voices, and was last updated 2 years ago by John Moffat.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • June 27, 2022 at 4:39 am #659361
    Frooti
    Participant
    • Topics: 92
    • Replies: 83
    • ☆☆

    m retained earnings = $20m ×
    280c/320c = $17.5m.

    Amounts in $000 Current Proposal 1
    Retained earnings 123,000 104,220

    Pls explain the calculation of retained earnings above, is there any other method through which calculations of retained earnings could be done?

    June 27, 2022 at 4:52 am #659362
    Frooti
    Participant
    • Topics: 92
    • Replies: 83
    • ☆☆

    can you pls provide link for securitisation process.

    June 27, 2022 at 7:48 am #659377
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    Part (a) is more of a straight financial accounts question rather than financial management.

    The current retained earnings are $123,000 as given in the question.

    If proposal 1 is implemented, the two things will happen. One is that the profit will fall from 26,000 to 24,720, i.e. by $1,280 and therefore the retained earnings will fall by the same amount.

    The other is that they will be using the $20M rated from the debt to repay shares. Given that the share price is $3.20 per share it means that they will buy back 20/3.2 = 6.25M shares. As per financial accounting ‘rules’, share capital will reduce by the nominal value of these shares (6.25M x 0.40 = $2.5M) and the remaining 20 – 2..5 = 17.5M will be taken from retained earnings.

    Therefore the new retained earnings will be 123,000 – 1,280 – 17,500 = $104,220.

    (Again, this is financial accounts and as will all of the professional papers the examiner is allowed to examine anything from any of the other papers. However for AFM this really only ever requires financial accounting knowledge.)

    June 27, 2022 at 7:50 am #659378
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    For securitisation, if you use the search box on this page you will find several previous replies from me explaining securitisation.
    This one should help you:
    https://opentuition.com/topic/securitisation-6/

    April 27, 2023 at 1:21 pm #683654
    thaarsini
    Participant
    • Topics: 0
    • Replies: 34
    • ☆

    Good day sir, may i know how for proposal 3 interest saved on lower coupon the answer is showing $136,000 because i am getting $13,560,000 ;( i have calculated several time but i not getting the value {$113m * 0.15(1-0.2)}

    April 27, 2023 at 4:08 pm #683663
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    It is multiplied by 0.15% (not by 0.15).

    The answer is therefore $135,600. Given that the examiners answer is showing everything in $’000’s, it is 136 to the nearest $ thousand.

    April 27, 2023 at 11:25 pm #683671
    thaarsini
    Participant
    • Topics: 0
    • Replies: 34
    • ☆

    Good day sir i just notice the percentage but usually when percentage are given for example 15% when calculating time we can put it as 0.15 but why this question we need to put additional percentage 0.15%, it means it will be 0.0015.
    I have notice in this question only the rate of return is applying like this…

    April 28, 2023 at 8:49 am #683682
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    The question says that the coupon rate is reduced by 15 basis points. 15 basis points is 0.15%, and taking 0.15% is the same as multiplying by 0.15/100.

    April 29, 2023 at 9:40 pm #683735
    thaarsini
    Participant
    • Topics: 0
    • Replies: 34
    • ☆

    Oh my god, i not sure how i overlooked that point sir.
    Thank you for pointing out to me sir. 🙂

    April 30, 2023 at 8:12 am #683746
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    You are welcome 🙂

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Viewing 10 posts - 1 through 10 (of 10 total)
  • The topic ‘ENNEA CO (JUN 12)’ is closed to new replies.

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