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In Sep/Dec 17, question on Eview Cinema Co – Calculated expected sale price; Please help me to explain 2 points in the answer:
Increase in NCA = proceed from sale of 7.674 – 902 increase in WC – 3.200 loan note repayment
I do not understand this formular,The information in note 4 and note 3 ( except information of 1000 ml share in issue) are not used for the answer?
There is the case that information provided in the question will not be used for answer in AFM exam ?
Thank you
This is actually more of a financial accounts question (which is perfectly valid).
The proceeds of sale are 7,674. Of this, 3,200 goes to pay off the loan notes. 902 goes to increase the current assets to 3249 (so that the current ratio is 1.5). This leaves 3572 which invested in PPE (all as per note 2 of the question).
The information in notes 3 and 4 is used in the answer.
Note 3 of the question is needed to calculate the new equity beta and hence the revised cost of equity.
Note 4 is needed to calculate the new MV of the question in order to calculate the revised WACC.
Thank you.
I do not have full question of Sep/Dec 17. The question extracted in revision Kit does not include the requirement of new equity beta and revised WACC.
Can I be awarded full marks if I just calculate the figure which impact SOFP and clearly stating which items increase/decrease without presenting full SOFP with 3 columns (original, adjustment and final) as the answer ?
The question in your kit has obviously been amended and so I don’t know exactly what was asked for. The original exam question asked for the full SOFP and therefore although you would get most of the marks you would only get full marks if you presented a full SOFP. Whether or not you calculate the figures using columns as in the examiners answer, is irrelevant.
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