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

ACCA Webinars: How to earn marks in Strategic Professional Exams. Learn more >>

20% off BPP Books for ACCA & CIMA exams - Get BPP Discount Code >>

Nente Co (Jun 12 Adapted)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Nente Co (Jun 12 Adapted)

  • This topic has 3 replies, 2 voices, and was last updated 2 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 21, 2022 at 12:27 pm #656131
    taskmaster
    • Topics: 19
    • Replies: 13
    • ☆

    Hi John
    In this queston part (b)(i), they have reduced the entire variable loan of $6500 from the overall value of Nente Co to derive at the Total equity value.

    But isn’t FCFE = FCF – debt int – debt repayment + cash from new debt raised.
    Here they don’t tell if Nente is repaying the entire loan, so why have they reduced that amount.

    May 22, 2022 at 8:08 am #656163
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49921
    • ☆☆☆☆☆

    It is not because they are repaying the loan.

    Discounting the free cash flows (before interest) at the WACC gives the value of the company (equity plus debt). Subtracting the debt from the value of the company gives the value of the equity.

    May 22, 2022 at 8:20 am #656168
    taskmaster
    • Topics: 19
    • Replies: 13
    • ☆

    So FCF using WACC gives Total Value of the company, i.e. equity + debt
    And Discounting FCF-int-repayment using Ke gives Value of equity only

    Is my understanding right?

    May 22, 2022 at 4:28 pm #656192
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49921
    • ☆☆☆☆☆

    Yes – your understanding is correct 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

ACCA Introducing professional skills into the Options exams

ACCA Professional Skills Webinar – Register now

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • John Moffat on FA Chapter 23 Questions Group Accounts The Consolidated Statement of Financial Position (2)
  • John Moffat on Double Entry Bookkeeping (part b) – ACCA Financial Accounting (FA) lectures
  • John Moffat on MA Chapter 5 Questions Ordering and Accounting for Inventory
  • John Moffat on MA Chapter 5 Questions Ordering and Accounting for Inventory
  • John Moffat on FA Chapter 4 Questions Accruals and Prepayments

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy