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Hello. I dont really understand the question b of this exercise. Why is it calculated the nominal value? And after that, in the revised before tax its deducted the interest and 10m. What are this 10 million?
Thanks
EstherWe need to know the nominal value of the bonds redeemed because the interest that we will save (8% – the coupon rate) is calculated on the nominal value.
The 10M is the interest that we are currently paying (from the Income Statement in the question). In future the interest payable will be less than 10M because of the interest we will save from having repaid the bonds.
Thanks Jhon for your prompt response. Now I perfectly understand. Many thanks for your help!!
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