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Sir while estimating kawa co share price if it is demerged, whey they have divided by 2000 shares? why not by 490 shares?
If it is emerged then the question says that the shareholders in Chakula will get one share in Kawa for every one share that they currently hold in Chakula. There are 2,000 shares in Chakura and so after the demerger the shareholders will still have 2,000 shares in Chakura but will also own 2,000 shares in Kawa.
Sir, in this same Qs, While calculating equity value of Kawa co if demerged, why they are not deducting MV of debt of 400? They have deducted 25%. But instead why not 400?
The question says that Kawa will maintain its capital structure.
Currently the equity has a value of 2,000 shares x $2.45 x 24.5% = $1,200, and the debit is $400.
Therefore the equity is 75% of the total market value, and this % will be maintained (so they will raise more debt or repay debt as needed).
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