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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Sep/Dec17, Q1, Conejo Co
The proposal 1 of the question was this:
Proposal 1: Either buy back equity shares at their current share price, which would be cancelled after they have been repurchased.
While doing part b(iii) answer, it said this:
Shares repurchased as follows: $1 x 120m shares deducted from share capital and $10 x 120m shares deducted from reserves. $1,320m, consisting of $11 x 120m shares, added to non-current liabilities.
I did not understand why are we taking 120m and not 400m equity shares. where did 120m come from?
They are raising 1,320, and the question says that they are buying back the shares at their current market price, which is given as $11 per share.
$1,320M / 11 = 120M shares
(They can’t possibly buy back 400M shares otherwise there would be no company!!!!)