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07-11-2022 : Answer to the weekend brainstorm.

 

First, let's recall the problem:Company A owns one third of the share capital of company B, which in turn owns one third of the share capital of A. A and B each have 50 of cash net of bank and financial debt and each has operating assets worth 100.

 

What is 100% of the group consisting of A and B worth in equity value? What is the value of 100% of the equity of A? What is the value of 100% of the equity of B?

 

Good thinking and see you on Monday when we publish the answers to this weekend's brainstorm.

 

A and B as a group have operating assets each worth 100 and each worth 50 in net cash. So the equity of A and B together is worth 300.

 

The value of A's equity is 150 (value of its operating assets + net cash) + value of one third of B's equity

The value of B's equity is 150 (value of its operating assets + net cash) + value of one third of A's equity

 

We thus have a system of two equations with two unknowns, the solution of which gives for the value of 100% of A's equity 225, and the same for B. We check that 2/3 of the equity of A that is held by shareholders other than B and 2/3 of the equity of B that is held by shareholders other than A is the original 300, which is the case.

 

Have a good start to the week.

05-11-2022 : This weekend's brainstorm

Company A owns one third of the share capital of company B, which in turn owns one third of the share capital of A. A and B each have 50 of cash net of bank and financial debt and each has operating assets worth 100.

 

What is 100% of the group consisting of A and B worth in equity value? What is the value of 100% of the equity of A? What is the value of 100% of the equity of B?

 

Good thinking and see you on Monday when we publish the answers to this weekend's brainstorm.



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Number 145 of October 2022

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