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Kaplan Exam Kit Q41 Tisa

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Kaplan Exam Kit Q41 Tisa

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 10, 2016 at 5:53 pm #314471
    solrac
    Member
    • Topics: 10
    • Replies: 9
    • ☆

    Hi Tutor,

    Working through this question and i don’t quite understand how its been regeared to arrive at Tisa’s equity beta of 1.879. It looks like the beta asset formula has been inverted to

    Be x (Ve + Vd(1-T)/Ve.

    I’d be grateful if you could shed a bit more light on this for me please. Am i missing something?

    Thanks

    May 10, 2016 at 6:29 pm #314475
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    I am sorry, but I do not have the Kaplan Exam Kit (I have managed to find the question, but not Kaplan’s answer).

    However, in order to calculate the equity beta for Tisa’s new investment you need to take the equity beta for Elfu, exclude the other non-component activities, and ungear it (using Elfy’s gearing) to get the asset beta for these components.

    Then you need to regear this asset beta using Tisa’s gearing in order to get the equity beta to apply.

    What you have written is not correct Assuming (as usual) that the debt beta is zero, then the equity beta = Ba x (Ve + Vd (1-T))/Ve. (It is the normal asset beta formula on the formula sheet, rearranged).

    I think it would help you to watch our free lectures on this.

    May 10, 2016 at 6:55 pm #314478
    solrac
    Member
    • Topics: 10
    • Replies: 9
    • ☆

    Hi John,

    Thanks for this. I’ve realised where i went wrong from reading your response. I did not write out my formula correctly. I hope i don’t this little costly mistake in the exam. Your lectures have helped a great lot.

    Thanks

    May 11, 2016 at 6:54 am #314529
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    I am pleased that you are now clear about it 🙂

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    Posts
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