P9 Management Accounting Financial Strategy-- Nov 2007 Q&A
I am facing problems with understanding the answer to P9 Nov’07 Section A question. I wonder if anyone is facing the same problems. I am referring to part (a) of the question regarding intangible asset value calculations. I would appreciate if anyone can help explain to me the following:
Replacement net asset value used is: 1,811m = Equity value + uplift in non-current assets + value of intangibles calculated using CIV method.
(Why add value of intangibles by CIV?)
i) Book value of tangible assets plus intangibles based on a ratio approach = 1,563m + 860m.
From what I could understand, 1,563m is value of intangibles using market-to-book valuation not book value of tangible assets as I think it should be. Why so?
ii) Book value of tangible assts adjusted for replacement values plus CIV = 1,256m + 555m.
But, the answer given is 2,033m instead of 1,811m. An error perhaps?
Any help will be greatly appreciated!