emma1985

Hi,
I'm using the June 2008 F7 exam to get some practice, but struggling with the first question!

'On 1 August 2007 Patronic purchased 18 million of a total of 24 million equity shares in Sardonic. Both companies have shares with a par value of £1 each. Patronic will also pay in cash on 31 July 2009 (two years after acquisition) £2.42 per acquired share of Sardonic. Patronic's cost of capital is 10% per annum.'

How do i calculate the Deferred payment?

ADBot

1438823

18 million shares x 2.42= 43560 (future value) X 1.1^-2 (interest) = 36,000

so total investment in S is 69000+36000=105,000