Dear sir,
As per example 3 (chapter 16) company A plc had gearing 0.4 and B plc had 0.2 however they raised finance and which changed the gearing to 0.4. sir is 0.4 gearing the gearing of A plc the accquirer or 0.4 is used because it is the gearing of the new company of which are about to acquire.
what would happen to the gearing after we acquire B plc?
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Regarding the valuation
2y ago#1I think that you have misunderstood the wording of the question.
A is acquiring B, and because A is raising more debt to partly finance the acquisition, the question says that A's gearing will remain at 0.4 (as it is before the acquisition).
0.4 is the gearing of A, not of the company they are acquiring (which is B) and per the question is is staying at 0.4.
Have you watched the free lectures working through (and explaining) this example?
Yes sir I have gone through the lectures . whos gearning is always relevant while calcualting the ke
The accquirer or the company we are going to acquire or the project.
2y ago#3It is the risk of the project (the beta of the project) that determines the rate at which we appraise.
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