Forums
Why are we multiplying depreciation also with inflation rate ?
AFM
answered on 19-Nov-24 17:12
Sir, I attached a picture. Can you please tell me how my approach is my wrong ? In second picture from ICAI and how you explained in class, we are multiplying Real Cashflows with inflation for all years. Aren’t we essentially multiplying depreciation with inflation rate too ? My approach is taken because of a similar question in previous problem from ICAI. I am attaching the 3rd picture for reference. Here, dep remained constant. Please provide some understanding as to where did I go wrong in my approach.
latest answer
Sure, no worries. No need to apologise.
Annapureddy Veera Mohan Reddy
CA Final
★ 6K+
3
784
Value of option
AFM
answered on 19-Nov-24 09:48
Here we added the value of the option to the project value as it is the benefit we get because of the option, but is not the the premium that we should pay (outflow to us), so should it be deducted.
latest answer
Option premium is paid when one buys or sells an option In this case the contact has an option embedded in it . Question is what is the value of the contract including the option value That is what we have computed PV of inflow - Outflow + PV of option
Raviteja Kusumanchi
Qualified CA
★ 42K+
1
711
Security Valuation TYK 12
AFM
answered on 18-Nov-24 17:54
Why we find interest using effective interest Rate. What's wrong in computing interest using the Face Value of Debenture and Bonds ?
latest answer
Thankyou sir.
R M
ACCA Professional
★ 4K+
2
549
Security Valuation TYK 6
AFM
answered on 16-Nov-24 12:53
In this question why we subtract that Rs. 20 . As per Formula of Interpolation I'm getting the answer different.?
latest answer
Ignore this. I think I done mistake. I should have found NPV.
R M
ACCA Professional
★ 4K+
1
754
Advanced Capital Budgeting
AFM
answered on 15-Nov-24 11:10
TYK sum: In Illustration 22 for replacement decision they have not used EAC for decision. But in Illustration 26 why they used EAC for decision? Please explain.
latest answer
They have used the concept of EAC in both questions but solved them differently. The replacement decision will be same which ever method you use. You can try and check solution under both methods.
Kaushik A
CA Final
★ 3K+
1
561
Best alternative
AFM
answered on 14-Nov-24 06:26
Is this view acceptable sir? I've solved it in a different perspective of which option reduces the least value for the acquirer
latest answer
Ok sir This perspective just struck my mind while seeing the illustration & that's why I asked Will solve it from the perspective that what is paid vs what is received w.r.t the target
Vigneshwar M
CA Final
★ 2K+
2
664
Opportunity cost
AFM
answered on 13-Nov-24 10:30
In sub-question (vi), we have taken the appreciation in share price post merger for comparison whereas ICAI has taken the earnings yield & as a result the answers are completely opposite to each other. In exam, should we solve in both the methods or will marks be awarded if we take the first view and make an appropriate assumption.
latest answer
Ok sir
Vigneshwar M
CA Final
★ 2K+
4
478
Value of original shareholders
AFM
answered on 12-Nov-24 12:52
In the study material, the pre-acquisition value of 211.05 Crs has been apportioned in the post acquisition % of share in the combined entity. Isn't it fundamentally not correct? That is, either they should've applied the percentages on post acquisition market value of the company or they could've simply started the pre acquisition values computed in sub-question (i)
latest answer
Ok sir :)
Vigneshwar M
CA Final
★ 2K+
12
401
Exchange Ratio
AFM
answered on 11-Nov-24 15:36
In this illustration, since they've specifically given that there are no synergy advantage available, does the of assumption that the PE will continue to remain 40 in the combined entity? That is, given there are no synergies, the value of the new combined entity will be just a simple addition of pre-merger values (2400+480=2880) & the PE will automatically come down to 36.92 post merger [Market price of Rs. 184.615 (2880L/15.6L) divided by EPS of Rs. 5 per share (78L/15.6L) equals]. Hence, the exchange ratio shall be 5:6 so that the shareholders of NN Ltd would not be at a loss when the shares of combined entity (with a PE of 36.92) are allotted to them. This can also be compared to Illustration 4 in P600 Compiler, where the PE of combined entity is same before merger but there are synergies in that case [2L + 1L becomes 3.5L].
latest answer
Ok sir Thank you!!
Vigneshwar M
CA Final
★ 2K+
7
662
Query related to SD
AFM
answered on 08-Nov-24 21:58
Why mean is taken as 27 in the first year. I didn't get the logic. In all other illustrations we took the actual mean
latest answer
Thank you very much sir
Krishna prasad e
CA Final
★ 16K+
2
290