ACCA F9 Lecture Notes – The cost of capital
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I have a doubt about this answer.. And also the plug in figures for the WACC calculation is not correct. It has taken the same values of example 9.
Have you watched the free lectures on this?
There is absolutely no point in studying from the notes on their own – they are lecture notes and it is in the lectures that I work through the examples, and explain and expand on the notes. If you are not watching the lectures for any reason then you must use a Study Text from one of the ACCA approved publishers.
You do not say what doubt you have with which example and so I cannot help you on this.
With regard to the WACC – I have no idea what you mean by the plug-in figures, but the answer in the notes is completely correct (and again, I work through the example and explain everything in the lecture).
Good morning. How do we arrive at $ 7 p.a for the interest as stated in the answer for example 10?
In example 10, the coupon rate is 10% and therefore the interest on $100 nominal is $10 per year.
However there is tax of 30% and so when calculating the cost of debt to the company we take the after tax interest (because interest is tax allowable) and therefore after tax relief of 30%, the net cost to the company on $100 nominal is $7 p.a..
Again, all of this is explained in the free lectures. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.