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Sep/Dec17, Q1, Conejo Co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Sep/Dec17, Q1, Conejo Co

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • Author
    Posts
  • May 17, 2018 at 1:25 pm #452445
    tasnuva
    Member
    • Topics: 24
    • Replies: 15
    • ☆

    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?

    May 17, 2018 at 5:32 pm #452518
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54724
    • ☆☆☆☆☆

    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!!!!)

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