- This topic has 3 replies, 2 voices, and was last updated 8 years ago by .
Viewing 4 posts - 1 through 4 (of 4 total)
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › ACCA Forums › ACCA FM Financial Management Forums › Kd irredeemable loan notes quoted at par
Hello,
I am having some problems figuring out how to calculate the cost of capital of the following:
14% irredeemable loan notes, quoted at par. B/S value £5m. CT 35%.
I need Kd for my WACC calculation.
The MV I assumed it to be £5m (i.e. £5m*100/100)
Kd however, I am not sure….
what about Kd = 0.14(1-0.35) = 9.1%?
If I divide this by 100 (MV) I get a weird percentage = 0.091%
Any help would be much appreciated.
Thanks,
Silvia
Why on earth do you want to divide by 100 twice? 🙂
If it is $100 nominal then the interest is $14.
So the cost of debt is 14(1-0.35) (after tax interest) / 100 (market value of debt) = 0.091 or 9.1%
Thank you 🙂
You are welcome 🙂