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Hi fellow students
I am going through past exams papers and I can’t wrap my head around some answers.
in Q1, when being offered a debt to finance the Bahari project, doesn’t it mean we have to recalculate WACC for the whole company since we now have a debt?
in Q2, when Strand shareholders are being offered bonds, shouldn’t we also calculate interest and value of the option as a premium paid? Using B&S or something?
Cheers in advance!
Hi,
If you read, there is a sentence saying Mlima is not going to take up any more debt. The paragraph just after Mlima’s p&l. So it is all equity discount rate. It is to be assumed so.
Give me some time to do Q2.
Actually after readying more on the topic, I understand that this is APV as opposite to NPV. Still no clue about the 2nd part though 🙂
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Hi
I need some help on J13 q1
from the answer of the examiner the benefit arising from the subsidy is calculated as
4% x 150m x (1-0.25) = 4.5m
Why has (1-.025) being used ? I can’t understandThanks for helping
hi,
the subsidy is interest saved – minus tax benefit on it. we lose the tax benefit on interest not paid right.. tax is 25% so what we save is 75% of the interest
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thanks for the help Jude 🙂
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