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1. Is supply chain financing in the syllabus and can it be examined as a section C question?
2. Is the formula for cash inflow=Opening Receivables-Closing Receivables+ (Cash&Credit Sales or Credit sales only)-Pangli Co BPP
1. Yes, it is in the syllabus. It could be relevant for a written part of a Section C question, but not very likely.
2. Cash received from credit sales is opening receivables + credit sales – closing receivables.
Total cash received from sales is the cash received from credit sales + cash sales.
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One more question.In OTQ Bank BV Q226, I got an answer through discounting $0.25 & $0.50 to T0 and also using the DVM to discount 0.50*1.03 to T3 then discount further to T0. However, the marking scheme said the present value of the growth was in T2. Can you tell me what I missed?
Had the first growing dividend been at time 1, then the formula would give the PV at time 0.
Here the first is at time 3, which is 2 years later than time 1, and therefore the PV is 2 years later also and is at time 2.
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Here the first growth happens in T4, so PV would’ve been T3 wouldn’t it? If PV was T2 like the answer said, then D1 would be 0.25*(1+g) which completely ignores 0.50 dividends in T3.
You can get the same answer in two ways (and it doesn’t matter which way you choose).
In the formula for Po, the numerator (Do(1+g)) is the dividend in 1 years time (the current dividend plus growth).
So put yourself at time 2, and then the dividend at time 3 is 0.50 and therefore the PV at time 2 is 0.50 / (0.10 – 0.3) = 7.14. Discount this for 2 years and the PV at time 0 is $5.90. (and add this to the PV’s of the dividends at time 1 and time 2,
Alternatively put your self at time 3 and therefore the PV at time 3 is (0.50 (1.03))/(0.10 – 0.03) = 7.36. Adding this to the 0.50 dividend at time 3 gives 7.86. Discount this for 3 years and it gives a PV at time 0 of $5.90 as before (and add this to the PV’s of the dividends at time 1 and time 3).
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Thank you Sir 🙂
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