Forums › ACCA Forums › ACCA FM Financial Management Forums › Minimum Tender Price
- This topic has 5 replies, 3 voices, and was last updated 9 years ago by John Moffat.
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- November 8, 2014 at 8:57 pm #208489
Work will generate costs of $20000 pa each year for 5 years. TW co has a WACC of 10% and pays corporation tax at the rate of 30%
What is the minimum tender price they should include in their proposal receivable at the end of the project that will leave Share holder wealth unaffected?
A $122,109
B $85,476
C $53,074
D $75,820Thanks
November 9, 2014 at 12:49 pm #208568It is the present value of the flows.
Discount (20,000 – (30% x 20,000)) using the 5 year annuity discount factor at 10%,
November 13, 2014 at 1:34 am #209504AnonymousInactive- Topics: 0
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Can anyone post the workings here….
Thanks in advanceNovember 13, 2014 at 9:48 am #209555Good heavens – what extra workings do you need???
The net inflow is 14,000 per annum (as above).
The 5 year annuity factor at 10% you can read from the tables.
Then you simply multiply them together to get the present value.
November 13, 2014 at 9:59 am #209567AnonymousInactive- Topics: 0
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Thank u sir
November 13, 2014 at 10:15 am #209578You are welcome 🙂
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