[Sneha00]

Please can you tell how they have selected the collar price, because in other questions we simply take the price which have minimum premium as out put option exercise price?
This is regarding c part for collar

[Sneha00]

1. But if in question its written that its exercised so will we be required to give the entry of this deferred tax?

2. In answer its written that 13.8 m will be recognised at that year end but we have recognised 2.4m already so only 11.4m should be taken as tax benefit?

3. What happens to the previous deferred tax asset recognised after the shares are recognised?

[Sneha00]

We are required to explain the treatment only when it says “Explain” or “Advise”?

If it’s written that “Prepare” or “Calculate” then we will have to simply give calculations?

[Sneha00]

Its the same questions part

[Sneha00]

Also in part c
The provision should not be made in year 20×2 or 20×3, in book amswer it is given in a confusing manner in which year it should me made and why

[Sneha00]

In year 20×4 the revenue recognized will be 1.27m? (5-2.6-1.13)

[Sneha00]

In BPP Revision kit question no 33 Pg-45

[Sneha00]

What is meant by exercising here then?

[Sneha00]

But in short call and put we receive premium, so here we were buying call option so it should have been long call?

[Sneha00]

Also in the same que, in b part answer, they have written go short in the futures market
What is short here?
We do long call and put, so here we should have done long put futures.
We do short only in collar.
Please explain what they meant by short?
Also for clarification please explain diff between short and long.

[Sneha00]

Its in Kaplan exam kit

[Sneha00]

Sir I didn’t understand, in both the questions we were asked to give their reaction and their percentage gain, so how can we assume in one that the shareholder won’t know about the synergy and will accept the old company value and in one that new company value is taken.

[Sneha00]

But this call option given to shareholder will depend upon whether they exercise or not, so why we take its value on 0 year?

[Sneha00]

Then in que Sigra co (dec 12 adapted) in this same share for share exchange was to be calculated but in this the combined company’s per share value is taken in method 2.

[Sneha00]

Also in the same que please explain how they have calculated the convertible value, why haven’t we compared any redemption value?

[Sneha00]

Okay, got it.
Thanks

[Sneha00]

Thanks a lot for clearing this.
I have one more doubt in this que.
What does the line ” it can be assumed that the debt capacity available to co is equal to amount of debt finance raised for the project” mean?
Does this have any relation with the previous doubt that what assumption we should take?

[Sneha00]

I have this same doubt in que Fubuki Co (dec 10) in this also amount of loan is not taken including issue cost.

[Sneha00]

Also in c part in answer they have written binomial option pricing model, what it is?

[Sneha00]

Then why we have to discount 28m? I am really confused with this.

[Author]

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