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Dear Sir,
In BPP revision kit Q35 Eview Cinema.In the question, they sell off a part of the company called EV Clubs.
When they calculate the revised EPS after selling the EV Club division, they take the whole company’s profit and deduct the profit of the part of the company they sold off.
Did they deduct the profit because they would have gotten that profit if they didn’t sell the business?
I don’t understand the logic behind it.
Thank you so much and god blessEV Clubs are forecast to make a profit of $454M, and this is 40% of the total profits of EV Cinemas Co.
Therefore the forecast profit of EV Cinemas if they do not sell EV Clubs is 454/40% = $1,135M
If they do sell EV Clubs then the profit of EV Cinemas will be 1,135 less 454.
also
why do they minus the net book asset value from whatever is remaining from the proceeds, and subtract that from the Non current assets?
I dont understand as i thought that the remaining amount was invested in NCA.thank you lots
Note 2 of the question says that the net book value of the assets to be sold are $3,790 and so this is subtracted from the NBV on the SOFP.
In addition that amount of the sale proceeds from selling EV Clubs (after paying off the loan notes and increasing the current ratio) is invested in NCA and so this is added to the NBV on the SOFP.
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