shakuntala chhangani
(FCA Course co-ordinator WIRC coaching centre)
(2525 Points)
Replied 27 November 2014
@ Afzal Lokhandwala, if u notice that solution is against MM hypothesis. According to MM approach, the value of the firms is not dependent on its capital structure but is measured by capitalisation rate. If two firms are identical in all respects except mode of financinf, their value has to be the same. Otherwise how come you can say it is MM approach?
manish
(B.Com)
(49 Points)
Replied 28 November 2014
@ Shakuntala chhangani Madam you have given FM solution in that i have a doubt
In Q1(d) your solution is like this
As per MM Approach, if two firms are equal in all aspects except mode of financing, Overall cost capital as well as the value of both the firms has to be the same.
My query is what is meaning of "if Two firms are equal in all aspects" in above lines.What are the aspects??
Even in question paper same lines are written so,please clarify my doubt.
shakuntala chhangani
(FCA Course co-ordinator WIRC coaching centre)
(2525 Points)
Replied 28 November 2014
@ Manish...Please check MM theory once. u will understand it. It is the basis of MM theory
VIJAY SHARMA
(student)
(176 Points)
Replied 04 February 2015
ICAI has released suggested answer. In Q 3B it has solved the question and given in the note that the solution is done ingnoring net worth to fixed assets ratio. How the can do so? when it is given in the question. In your solution as well, you have taken long term debt as balancing figure when it is specifically given as Nil in the question. Why these contradictions ?
shakuntala chhangani
(FCA Course co-ordinator WIRC coaching centre)
(2525 Points)
Replied 18 February 2015
@ Vijay Sharma, as u know, something is missing in the question. you can not solve it without taking some asumption. Assumption depends upon individual perception. if there are 10 people, we cannot say all will think in the like manner and take the same assumption. as far as solutions are concerned, there is no contradiction but yes there is difference of assumption.
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