Mock 3 debrief - Section 2
Taught by Louise Setton · AI tutor support included
You’ll learn how to debrief Section 2 of Mock 3, focusing on how an acquisition and its financing affect Weighted Average Cost of Capital (WACC), gearing and the appropriate appraisal discount rate.
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In this lesson
- 0:00 Mock Three Acquisition Funding
- 2:01 Evaluating The Three Funding Sources
- 6:14 Current WACC and Funding Data
- 14:11 Structuring the WACC Answer
- 20:23 How Debt and Equity Change WACC
- 26:15 Business Risk and Combined Gearing
- 28:46 Selecting the Appropriate Discount Rate
- 32:00 Evaluating Acquisition Funding Options
- 32:50 Bank Debt Advantages and Risks
- 36:51 Equity and Cash Funding Evaluation
About this lesson
The lesson applies WACC theory to the proposed $3.2 billion acquisition, including new bank debt, equity funding, Van Park’s existing borrowings, changing business risk and the use of book versus market weightings. You’ll also evaluate bank debt, ordinary shares and internal cash as funding sources, considering interest costs, covenants, repayment obligations, shareholder dilution, board influence, dividends and cash flow flexibility. This ACCA/CIMA case study lesson shows you how to structure a well-applied exam answer, use the scenario’s figures effectively and avoid relying on theory without linking your points to the business.
Duration: 43m
Transcript
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