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John Moffat.
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humai
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Sir in this Qs exmainer has calculated Estimated corporate value of $47,944m and
Estimated equity value = $47,944m – $1,800m = $46,144mMy Qs is that instead of 1800 why has he not deducted (47944 * 20%) = 9589 from corporate value as in Qs it was mentioned that capital structure is such that 20% is Debt
John Moffat
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The reason is that although they aim to have 20% debt in the future (and so that has been used in the calculations in appendix 2), they will not have 20% initially – it will just be the overdraft converted into debt.
However, you would not lose many marks if you had done what you suggest.
humai
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