March 2026 ACCA Exams

Comments & Instant poll

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2026 exams.
Get your discount code >>

September 2016 MCQ #10

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
November 29, 2017 at 10:29 am #418825
aiymgul91
Participant
- Topics: 3
- Replies: 1
Good day!
Could you please help me with question #9 of September 2016 MCQ (Section A) about theoretical value of company. I could not get the logic of the answer.
Thanks in advance.
November 29, 2017 at 11:49 am #418857
John Moffat
Keymaster
- Topics: 57
- Replies: 54831
The operating cash flow is $2M per year in perpetuity.
The WACC is 8%.
Therefore the value of the company is $2M p.a. in perpetuity discounted at 8%, and the discount factor for a perpetuity is 1/r, which here is 1/0.08.
2M x 1/0.08 = 25M
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.