Question
Calculate the cost of investment for the following scenarios: AMB Berhad acquires 100% of the equity of April Berhad on 31 December 2018. There are
Calculate the cost of investment for the following scenarios:
AMB Berhad acquires 100% of the equity of April Berhad on 31 December 2018. There are three elements to the purchase consideration: an immediate payment of RM3 million, and two further payments of RM1million on 31 December 2019 and 31 December 2020 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. AMB Berhad uses a discount rate of 7% in any present value calculations.
[10 marks]
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