First of all thank you all the lecture of Fm are really good ?.

While going through this unit of business finance I have a question related to this. Which is as follow.

In the case of the premium on the redemption of debenture at what value we will calculate the premium if we have given the market value, face value or nominal value?

Hi, Sir can you please explain why we haven’t calculated the total debt value in Example 08 & 09. Calculation showing the total value of Debt ? i.e for P total value is $ 625,000 (5,000*125)

Is the answer is complete with giving value of Nominal $ 100 debt only ?

Unless the question specifies different you can give the answer as the MV per unit or as the total capitalisation. (Section A and B questions will specify which)

Hi,
I got quite confused that, in the question the debentures are redeemed at par(I think that is $100), but in the working it is calculated with the expected share value (which is $110.23).

The question says that the debentures are convertible to 20 shares. Debenture holders will currently be expecting to convert because they are expecting the value of 20 shares to be more than par/nominal (which the question says is $100). So the MV of the debentures will be as per the lecture. (I assume that you have downloaded the free course notes?)

sarabjeet@26 says

Hi sir,

First of all thank you all the lecture of Fm are really good ?.

While going through this unit of business finance I have a question related to this. Which is as follow.

In the case of the premium on the redemption of debenture at what value we will calculate the premium if we have given the market value, face value or nominal value?

John Moffat says

The premium is always calculated on the nominal value.

KimR says

Hi,

for example 12 at the end: how come we don’t consider the expected growth rate when we calculate the conversion premium?

TIA

John Moffat says

Because that is the way that the conversion premium is defined!

KimR says

Thank you 馃檪

John Moffat says

You are welcome 馃檪

ilham9089 says

Sir, in example 12 why do we take into account the interest for the year 2007? Is interest always paid at the year end?

Nkanyi03 says

Good day.

will you please explain how do we got to 3.605 discounted amount in Example 10

John Moffat says

It is the 5 year annuity factor at 12%, read from the tables provided in the exam.

(Have you watched the earlier lectures on how to use the tables?)

Ahmadhassan0709 says

Hi, Sir can you please explain why we haven’t calculated the total debt value in Example 08 & 09. Calculation showing the total value of Debt ? i.e for P total value is $ 625,000 (5,000*125)

Is the answer is complete with giving value of Nominal $ 100 debt only ?

John Moffat says

Unless the question specifies different you can give the answer as the MV per unit or as the total capitalisation. (Section A and B questions will specify which)

ninaaxtopol says

Example 12, Convertible debt, I believe there is a calculation error, i.e 8 x 2.487=18.90, should be 19.896

Nina

John Moffat says

Yes – it is an error 馃檨

I must re-record the lecture.

draganel says

Hi, can you please tell there are some differences between Loan note and debenture?

John Moffat says

They are the same – different names for the same thing 馃檪

draganel says

ok thanks 馃檪

zjanus says

Hi,

I got quite confused that, in the question the debentures are redeemed at par(I think that is $100), but in the working it is calculated with the expected share value (which is $110.23).

John Moffat says

The question says that the debentures are convertible to 20 shares. Debenture holders will currently be expecting to convert because they are expecting the value of 20 shares to be more than par/nominal (which the question says is $100). So the MV of the debentures will be as per the lecture. (I assume that you have downloaded the free course notes?)

zjanus says

Oh I think I understand now. Thank you, sir!

John Moffat says

You are welcome 馃檪

manishatai says

Sorry john I got 19.90 for the interest 1-3 discounted at the present value is that correct? Thank you

tabusheev says

You right. It was small error.