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Hi there,
The following is a question asked in past exam papers at my college. Any idea whats required?“If you had to make a seperate calculation of the cost of Retained Earnings, what factors would you take in to account? ”
Thanking you in advance.
Damien.Without seeing the full question, I really cannot know what is required!
If it is a past ACCA question then tell me the name and year and I will find it. Then I will be able to help you properly.
On what you have written, all I can suggest is that because retained earnings belong to the shareholders, it really depends on what return the shareholders require in order to leave their money within the company (which depends on the return they are currently getting and also the effect of the change in gearing as a result of leaving their money within the company, and also where the company is investing the money retained (if it changes the business risk of the company then that would also effect the return required by the shareholders, and hence the cost to the company).
Hi again,
It is a past exam paper in my college not acca, however we get exemption from acca F9 if exam is passed. The course is taught using ACCA F9 syllabus (more or less).
The question arises on foot of a WACC calculation question requiring you to calculate WACC using book valuation and then market valuation.
The question above is part 3 (5 mark)
Part 1 =book value WACC
Part 2= market value WACCThank you for your swift reply.
Regards,
Damien
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