Sir, if the loan is convertible in 7 years and redeemable after 10 years so interest received in 8 and 9 years is included when comparing i.e if interest is7 % and the cost of debt is 8% does the calculation of 10-year redeemable debt is ( interest rate *three-year annuity factor +par value discounted at 3rd year) I hope you get my point
We are not allowed to upload the answers because they are copyright of the ACCA.
Some of the questions should be in your Revision Kit (the BPP Kit has two questions from that exam). Otherwise you might find them by searching on Google.
Open tuition study resources are very beneficial to all accountancy students. I thank the people who have worked tirelessly to make this material available for use
They are both costs to the company, but that is irrelevant to the question.
They question asks for the market value, and it is the investors who determine the market value – not the company. The market value is the present value of the future receipts discounted at the investors required rate of return.
I do suggest that you watch my free lectures – they are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
The decision to convert or take cash will not be made until 7 year from now, and they will have already received the interest for those 7 year. We are simply calculating what decision we expect they will make in 7 years time.
Have you watched the free lectures on convertible debt?
.Ali says
Sir, if the loan is convertible in 7 years and redeemable after 10 years so interest received in 8 and 9 years is included when comparing i.e if interest is7 % and the cost of debt is 8% does the calculation of 10-year redeemable debt is ( interest rate *three-year annuity factor +par value discounted at 3rd year)
I hope you get my point
tanyanti says
Hi Mr. John,
could you please tell me where i can get the examiner answer for this paper March/June 2016 on your website ?
Thanks in advance.
John Moffat says
We are not allowed to upload the answers because they are copyright of the ACCA.
Some of the questions should be in your Revision Kit (the BPP Kit has two questions from that exam). Otherwise you might find them by searching on Google.
tanyanti says
thank you so much. it have found the answer by searching on google. 馃檪
John Moffat says
Great 馃檪
bulut says
Dear Sir,
is there an answers for the rest of the paper ?March/June 2016 sample questions
Kind Regards,
Bulut
mehshi says
why 1070 is discounted for one year instead of 7 years.
John Moffat says
To go from an amount at time 8 to an amount at time 7
chipelelo says
Open tuition study resources are very beneficial to all accountancy students. I thank the people who have worked tirelessly to make this material available for use
shyamkumar says
Hello Sir,
The 7% interest on nominal of $1000 loan note & cost of debt on CL Notes 8%… from the company’s point of view, what’s the diff?.. both are cost’s
Sorry sir, a bit messed in my head up after reaching the finishing line.
John Moffat says
They are both costs to the company, but that is irrelevant to the question.
They question asks for the market value, and it is the investors who determine the market value – not the company. The market value is the present value of the future receipts discounted at the investors required rate of return.
I do suggest that you watch my free lectures – they are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
accastudent001 says
Dear Sir,
Here when deciding on the assumption of whether they will convert or redeem, why do we not take interest receipts into consideration ?
I mean we only consider value of shares receipts or redemption value, but future interest receipts for 7 years is not considered.
Is it ignored because it would be equal whichever way it is, either conversion or redemption, it would be a receipt of 490 (70*7 years) ?
John Moffat says
The decision to convert or take cash will not be made until 7 year from now, and they will have already received the interest for those 7 year.
We are simply calculating what decision we expect they will make in 7 years time.
Have you watched the free lectures on convertible debt?