Ceria Berhad acquires 100% of the equity of Kelora Berhad on 31 December 2022. There are...
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Ceria Berhad acquires 100% of the equity of Kelora Berhad on 31 December 2022. There are three elements to the purchase consideration: an immediate payment of RM5,000,000, and two further payments of RM1,000,000 each on 31 December 2023 and 31 December 2024 if the return on capital employed (ROCE) exceeds 10% in each of the subsequent financial years ending 31 December. All indicators have suggested that this target will be met. Ceria Berhad uses a discount rate of 7% in any present value calculations. Required: Compute the value of the investment. Ceria Berhad acquires 100% of the equity of Kelora Berhad on 31 December 2022. There are three elements to the purchase consideration: an immediate payment of RM5,000,000, and two further payments of RM1,000,000 each on 31 December 2023 and 31 December 2024 if the return on capital employed (ROCE) exceeds 10% in each of the subsequent financial years ending 31 December. All indicators have suggested that this target will be met. Ceria Berhad uses a discount rate of 7% in any present value calculations. Required: Compute the value of the investment.
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To compute the value of the investment we need to calculate the present value of the future cash flo... View the full answer
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Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
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