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Dear Sir,
In the Mar Jun 2016 past year paper question 1, why is it that the question says that the investment will be funded by both the sale of investment and the coming TWO years’ cash flows, but we only calculate the cash flows from the sale of investment and only the current year cash flow? Please help
But have you read what the examiner has written under ‘background information’ in his answer?
The whole of the remainder of the $40M needed (after the sale of the equity investment) can be realised from the free cash flows in the first year. So none is needed from the second year.
(But, of course, the question does say that the dividend in the second year will stay the same as the dividend in the first year).
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