[Alinaaa]

Thank you Mr John,

Could you please advise what we have in these 2 questions and what is the difference of calculation.

[Alinaaa]

Hi Mr John,

if
1. Received is EURO- contract size is EURO – then they need to sell EURO to buy USD- put option will be selected- option to sell

if

2. Received is EURO – contract size is USD – then they need to buy USD – call option- option to buy—- but they need to sell EURO and have put option in place to convert in USD.

may you please clarify this part, confusing 🙁

thank you

[Alinaaa]

Thank you a lot!

[Alinaaa]

Hi Mr John,

120.000 is a number of shares purchased , why we are calculating 0.37% on it, why this is considered as an additional interest payable.
we raise additional debt $1320 ., why no taking this number

thank you

[Alinaaa]

Sorry Mr John, may you please also explain what is this 120?

Additional interest payable due to higher coupon
0.37% * $120m * (1 – 0.15)

Thank you

[Alinaaa]

thank you Mr John for your support, all is clear.

[Alinaaa]

thank you a lot!

[Alinaaa]

Thank you Mr John, sharing your opinion 🙂

[Alinaaa]

Thank you Mr. John

i just copied the answer from the kit. were it says -Assuming that the spot rate in four months is the same as the futures rate, the outcome will be: page 219

in the solution part the one month basis 0.0016 is added to 5 month future not deducted that is why i raised this question. 0.0016+1.3698 = 1.3714

thank you for your support

[Alinaaa]

Thank you very much Mr John for clarification.

1.The gearing with Tax benefit will save $1.1M tax per year- this is clear.

2. Subsided loan – i understand that instead of taking loan for 7% there is an option for 3%, difference is benefit – 4%. However confusion for me is – why for subsided loan we are not taking only tax 1.5 , as you said we never include interest why now we take interest ( as in point 1 – $1.1)?
Subsidy benefit (150mln*4%) = 6
Tax 25% =1.5
After tax benefit = 4.5

3. During calculation of APV- cash flow discounted by WACC 11%, while tax saving and subsided loan discounted by 7% which is debt interest rate, while in the question there is a risk free rate available, why we dont take it?

4. To include it in the cash flows as well would be accounting for it twice – your answer
i am taking Loan less tax. please explain what does it mean accounted twice , where?

5. please find the link of video which i watch for APV. please guide me if not on the right way
https://opentuition.com/acca/afm/the-impact-of-financing-part-2-acca-afm-lectures/

Thank you once again for your time and support

[Alinaaa]

the interesting part is Mr John that i am receiving the correct answer only with negative sign. if i am doing wrong why i am getting correct answer
Loan -150

Year 1 – 4mln – 3.4 + 4.5= 5.1
Year 2 – 8mln – 3.4 +4.5 = 9.1
year 3- 16mln – 3.4+4.5= 17.1..
Year 15 21.2 mln- 3.4+4.5=22.3
——————————————
After discount – 128.5

-150+128.5= -21.5

[Alinaaa]

Noted Mr. John. sorry.

in the question it says government offered a loan, means company will take it. if company is fully equity financed, yes tax 1.1 should be added to free cash flow 4, however the same cash flow should be used to pay interest.

in your other answers it is also mentioned if we include interest and tax we account it twice , this part is not clear, may you please bring an example.

we also have saving 4% (7% is loan in the market government offered for 3%). why in this case we dont take only tax saving 1.5, instead we calculate interest 6, deducting tax 1.5, then consider 4.5. what is difference between this one and 1.1 only tax amount.

thank you for your support

[Author]

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