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Question 4 needs a small tweak, sorry. It’s already on my list of amendments to make at the same time that I’m typing out the workings.
The correct answer is shown as $1,029,927. This needs to be amended to $1,031,127.
Cost of investment:
Shares 300,000 @ $2.50 = $750,000
Deferred payment $330,000 x 1 / 1.1 x 1 / 1.1 = $272,727
Profit share 30% x 4 / 12 x $84,000 = $8,400Total $1,031,127
Question 5
Shares 50,000 @ $1.50 = $75,000
Deferred payment $377,914 x 1/1.08 x 1/1.08 x 1/1.08 = $300,000
Profit share 4/12 x $84,000 x 35% = $9,800
Pup 35% x 4,000 = $(1,400)Total $383,400
OK?
I will revisit the notes, thanks. In the mini excercises, Goodwill Petras and Signe, there are 4m shares in issue, how do i figure out how much they are worth?
The general rule is that the default value is $1 per share unless otherwise indicated
OK?
No problem – but the examiner will normally be very clear about this point
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