Tippletine: Kie + 0.4214Kie

Hi John,

I am having some trouble with ungearing the cost of equity for the Tippletine question (Bpp Revision kit Q 22).

I have searched around the forums and also online, seeing your posts where you reference that the question I am about to ask is basic algebra, but I am struggling with the logic and would likely to understand rather than simply learning it by rote.

My understanding is that Kie + 0.4214Kie is essentially 1 * Kie + 0.4214Kei, but I am struggling to understand how 1 * Kie + 0.4214KEI becomes 1.4214Kei.

I assume the reason is that both sides are multiplied by Kei, therefore, they cancel out, but I am struggling to understand why… is it just simply a rule that they cancel out?

Any help would be greatly appreciated – my basic math skills aren’t horrific, but it’s been 20 odd years since maths class!

Best,

Kyle