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hi sir
sorry the reference of the year of this question is not provided in the bpp kit. i hope you have this question.
my query is , if you could please confirm if im right in assuming,
1. why in the financing mix(part a) we are taking a balancing figure for the mezzanine debt of 10 m whereas we know it is 15 m?
my answer is, they only need 35 m and if they take the entire 15 m of the mezzanine debt that would make it 40 m which is more than what they need.
2.could you please tell me how the gearing is 30 m debt and 5 m equity?
thank you
The question says that up to $15M is available – not that they will borrow all $15M.
As the answer states, it is better not to borrow it all because the interest cost is higher.The total finance is $35M, of which $5M (4 + 1) is equity and $30M (20 + 10) is debt (as per the summary of the financing at the beginning of the answer).
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