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When we are acquiring a company(Mastravers Co) do we need to pay for the debt as wel?
Yes. The value of the business is the total of the equity plus the debt.
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?
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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