• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

LIRIO CO (MAR/JUN 16)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › LIRIO CO (MAR/JUN 16)

  • This topic has 5 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • June 1, 2021 at 8:37 pm #622697
    annkamath
    Member
    • Topics: 5
    • Replies: 5
    • ☆

    Hi sir,

    I am quoting the question,
    “It proposes that the required finance is obtained from a
    combination of funds received from the sale of its equity investment in a European
    company and from cash flows generated from its normal business activity in the coming
    two years.”

    The question states that the project will be funded in two ways – cashflows from biz of 2 years and receipts from Europe. I don’t understand why we have to take two years of cash flows when the receipts from Europe coming in 2016 and the cash flows for the year ended 2017 is way more than enough to fund the investment.
    Or do they mean year 1 = receipt from Europe and year 2 = dividend capacity making it cashflows from 2 years?

    June 2, 2021 at 7:58 am #622727
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    The question is not saying that they will use all of the cash flows from the normal business activity. They will use the funds generated from the sale of the investment and get the rest needed from cash flows from the normal activity.

    June 2, 2021 at 11:14 am #622767
    annkamath
    Member
    • Topics: 5
    • Replies: 5
    • ☆

    Hi sir,

    yes, but when we are calculating the dividend for the year ended 2017 – we take it as the amount after funding the project.

    This means that the project is funded solely from the “sale of equity investment” and the “operating cash flow of 2017”, the leftover which is distributed as dividend for the year.

    What’s the need for year 2 cash flow?

    June 2, 2021 at 4:04 pm #622797
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    It is because we need to calculate the market value of the shares with and without the new project, which is the PV of the future expected dividends.

    June 3, 2021 at 4:35 pm #622976
    annkamath
    Member
    • Topics: 5
    • Replies: 5
    • ☆

    Okay, thank you sir.

    June 4, 2021 at 6:57 am #623039
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)
  • Hsaini on Accounting for Management – ACCA Management Accounting (MA)
  • kennedyavege@2023 on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in