- This topic has 1 reply, 2 voices, and was last updated 5 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
Sir please how is this question solved?
R plc has in issue$400000 8%bonds, redeemable in 5years time at a premium of 10% investors require a return of 12%p.a. the corporation tax is 35%. What is the total market value of the debt in issue
The market value is the present value of the (pre-tax) interest and redemption amounts, discounted at the investors required rate of return of 12%.
(Tax is irrelevant because it is investors who determine the market value, and they are not affected by company tax).This is all explained, with examples, in my free lectures on the valuation of securities.
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.