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opao co (dec 18)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › opao co (dec 18)

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • March 3, 2021 at 3:42 am #612880
    Jiya024
    Member
    • Topics: 168
    • Replies: 56
    • ☆☆☆

    sir in this question, if we were given the cost of equity of the combined company and if for example one of the offers would have included a bond offer, then we would have had to deduct bond coupon from combined earnings, to arrive at combined MV of equity using given Ke, right?

    and then gain for respective company shareholders would have meant combined MV of equity/total no.of shares, without deducting the bond? because bond interest has already been deducted.

    March 3, 2021 at 9:29 am #612939
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Yes – discounting the free cash flow to equity (which is after debt interest) at the cost of equity gives the MV of equity, as I explain in my free lectures.

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