View all ACCA Paper F9 lectures >> | This ACCA F9 lecture is based on OpenTuition course notes, view or download lecture notes here>> |

### Comments

### Leave a Reply

You must be logged in to post a comment.

OpenTuition.com Free resources for accountancy students

Free ACCA lectures and course notes | ACCA AAT FIA resources and forums | ACCA Global Community

rehan1o1 says

Hello Sir, Just wanna ask one thing while calculating cost of debt, you have assumed the interest to be 7 p.a. shouldn’t it be 10? because in example 8, while calculating the same thing you have ignored tax. I’m abit confused where we should ignore tax and where we should consider it. Waiting for your answer.

Thanking you in anticipation.

Rehan

John Moffat says

I think you must have skipped through the lecture too quickly (or else you have not downloaded the course notes, which makes the lecture impossible!).

When we are calculating the return to the investor then tax is not relevant – they investor receives the full interest.

When we are calculating the cost to the company then tax is relevant – the company gets tax relief on the interest which makes the net cost lower.

I assume that you have downloaded the Course Notes (otherwise it is pointless watching the lectures ) in which case you will see that the requirements for both examples are (a) calculate the return to investors, and (b) calculate the cost of debt to the company.

I have done the same thing in both examples.

acca2050 says

Yeah John! I remember waac formulae was at 2 places in investment appraisal questions. 1 was just easy formuale, the other time it was added with capm( project-specific cost)…!

John Moffat says

Not quite. There is only one way of calculating the WACC.

The calculation of the cost of equity can be in two ways – using the dividend growth model or using the capital asset pricing model (depending on the information given) – both are covered in our Course Notes and lectures.

iluvgorgeous says

thank you so much

sandra1964 says

Thanks so much John you are a gem

iluvgorgeous says

example 10 on wacc- how is Debt market value worked out to be 6.3? sorry

John Moffat says

The nominal value of the debentures is $6M.

The market value is 105 (which means $105 for every $100 nominal).

So the total market value is $6M x 105/100 = $6.3M

Amon says

Dear John,

In example 10 of chapter 17 of OT notes – IRR= 5%+12.59/25.06*5%

I’m bit confused because we first discounted at10% and then we guessed d.f @ 5% because of negative NPV at 10%, comparing this against example 8 shouldn’t IRR be 10%+12.59/25.06*5%

I’m not sure why you’ve used 5% instead of 10%. Please explain

Looking forward to your reply.

Thanks

Castrin

Amon says

Apologies, it’s quite straight forward, I understand it perfectly now.

M Fauzi says

Dear Sir John Moffart,

You just make things so simple that i now have confidence in mastering this subject. I like it when, in your humour, you pick on Peter, Valentino, Andrea and ‘Hello, Hello’ for lagging in their attention (smiling…) Your lectures are just soooo joyful and beneficial to hear and watch.

You are indeed a gem and a great asset to producing future generations of capable accountants!

Please continue with your antics and style of lecturing. They are very effective and I just love them…..

eadinnu says

Dear prof,

What you have done on WACC is to demystify a dreaded masquerade.

OT is the best! I am not only confident that I will pass F9, but will make a good grade.

Thanks a lot.

zee90 says

5% Preference shares ($1 nominal value) 10

the ex-dividend market value of the preference

shares is $6·25 million

what will be the cost of preference shares ????????

thank you