After calculating the the perpetuity value the amount of debt is taken as 900, it includes the short term loans and long term loan, if short term loan are taken then why not current liability of other payables included?
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Wurrall inc (jun 04)
6y ago
6y ago#1Debt is borrowings which never includes payables and 'other creditors'.
As to whether or not to include short-term loans and overdrafts it depends on whether or not these borrowings are likely to remain in the longer-term. Obviously short-term loans have to be repaid but they can be replaced by other borrowings when repaid and the question does say that they will meet any changes in the financing needs by adjusting its overdraft. This implies that the short term borrowing will remain in the longer-term.
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