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Hi Sir,
I was stuck on this question (part A)as I don’t understand where the figure for total additional funds available to Nubo co for new investment is = $300.6m+99m= 399.6m
I understand where the 99m comes from but confused about $300.6m?
I thought the correct answer was $201.6 so asset remaining plus the $99 extra cash from sale so total of $300.6 rather?
Thank you in advance
After the sale, the assets remaining in the company are 30% x (550 + 122) = 201.6.
These are those of the existing assets that still remain, but in addition they will have received 99 from the sale. So in total the assets after the same will be the total of 300.6.
This is therefore the amount that they will be able to borrow for new investments. However they also have 99 available in cash from the sale that is available for investment.
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