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Louieed co (mar/jun 16)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Louieed co (mar/jun 16)

  • This topic has 3 replies, 2 voices, and was last updated 7 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • May 29, 2020 at 12:34 pm #572195
    Anonymous
    • Topics: 3
    • Replies: 1
    • ☆

    In part c, for option 2 & 3 they have calculated the opportunity cost for cash surpluses. Then in option 1, why they have not calculated the interest that we will earn from cash surplus that we will have of 220+64 and will not be used anywhere?

    May 29, 2020 at 3:44 pm #572221
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 41628
    • ☆☆☆☆☆

    The question says that the debt funding needed will be reduced instantly by the cash balances. So there won’t be any cash to earn interest.

    May 29, 2020 at 3:49 pm #572227
    Anonymous
    • Topics: 3
    • Replies: 1
    • ☆

    But in option 1 there is share for share exchange so why we will require the debt in this option?

    May 29, 2020 at 3:51 pm #572228
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 41628
    • ☆☆☆☆☆

    Sorry – I read your question too quickly and thought you were referring to options 2 and 3 🙁

    The reason is that the profits after tax will already be including the interest.

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