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Ask the Tutor ACCA AFM

March 2020 Q1

WWM6y ago
When we are acquiring a company(Mastravers Co) do we need to pay for the debt as wel?
John MoffatJohn MoffatTutor6y ago#1
Yes. The value of the business is the total of the equity plus the debt.
WWM6y ago#2
In the Dec 2014 Q1, the value to Avem Co of accruing Fugae Co was calculated without deducting the debt value of Fugae Co doesn't this concept of value of the business be applicable in the case of Avem Co?
John MoffatJohn MoffatTutor6y ago#3
In Nahara and Fugae we are discounting the FCFE at the cost of equity, which gives the value of the equity. In Mastravers we are discounting the FCFF at the WACC, which gives the value of the business. (You can find lectures working through the whole of the Nahara and Fugae question linked from this page: https://opentuition.com/acca/afm/afm-revision-lectures/ )
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