- This topic has 5 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
JUNE 15 :The net cash raised by the rights issue will be used to redeem part of the loan note issue. Each loan note has a
nominal value of $100 and an ex interest market value of $104. A clause in the bond issue contract allows
Grenarp Co to redeem the loan notes at a 5% premium to market priceSOL :Nominal value of loan notes redeemed = 10,920,000/(109·20/100) = $10,000,000
DEC 11:The 8% bonds are currently trading at $112·50 per $100 bond and bondholders have agreed that they will allow
Bar Co to buy back the bonds at this market valueNominal value of bonds redeemed = 90m x (100/112·50) = $80 million
In June 2015, the price they have to pay to redeem the notes is 104 + 5% = 109.20.
So they pay $109.20 for every $100 nominal.
If they pay $10.92M then the nominal value is 100 for every 109.20, so the total nominal value is 10.92 x 100/109.20 = $10M
In December 2015, they have to pay $112.50 for every $100 nominal.
So if they pay $90M in total then the total nominal value is 90 x 100/112.5 = $80M
(In June he wrote it as 10.92 / (109.20/100) but that is exactly the same as writing 10.92 x 100/109.20. It doesn’t matter how you write it in the exam 🙂 )
june 08:Book value of 7% convertible debt $29 million
Market value of convertible debt $107·11 per $100 bondsol: Market value of convertible debt = 29m x 107·11/100 = $31·06 million
like here if i do like that 29 x100/107.11=27.07 not getting same
Of course you won’t!
In the first two questions you are calculating the nominal value.
In this question you know the nominal value (29M) and you are calculating the total market value.I do suggest that you watch our lectures. They comprise a complete course and cover everything you need to be able to pass Paper F9.
ok ! so to calculate earnings we will calculate using nominal value ? for WACC market value ….
- You must be logged in to reply to this topic.