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Dear sir,
I can somehow reconcile calculation for year 1 on net interest payment (63), but how would the interest payment in year 2 change to (65) ?
i am not sure neither to understand why investment remains flat at 32 on SOFP since it is said that investment in plant is done in line with sales. could you help clarify these 2 points ?thanks a lot in advance
thanks for your answer but still a bit unclear – should we translate into accounting terms (although the intention is to measure economic terms) – if we do not debit expenses, then we debit asset which would impact CE – isn’t ? Can we just ignore R&D investment on B/S despite we consider this will generate future benefits ?
Dear Sir, well understood why R&D costs are added up on adjusted profit. but why is there no adjustment of capital employed ? if i understand well, we either consider as costs or asset -> here asset, then should we consider R&D investment as adjusted capital employed ?
thank you for your help.4B – I thought it was about sensitivity analysis because although they asked that NPV=0, they explicitly asked vacation in price which was only one variable not directly impacting profit (fixed costs 900 )
Dear John,
Same Your company question – where the euro-crisis is explained as “Yields on government bonds in troubled countries rose, bond prices fell…” could you confirm whether my understanding is correct ?
When buying a government bond, the government is supposed to pay you interest at defined periodical time – are we saying here that during Euro crisis, these interest payment were not honoured ?
The price of the bond fell because of the associated risk of interest payment postponement – we are talking about the market price of any bond previously acquired, for which value has reduced in the market
Am i correct ?
Dear John, I am looking at Katmai question c; my BPP suggested answer says, after the calculation of the 6 month volatility pf 1,061 that “this means that at the 95% confidence level, the interest rate will be 2,1% above or below current LIBOR.” may I ask you to clarify where this 2,1% is coming from, would be very helpful ?
Dear John,
same Troder question on collar question b. I have difficulty to uderstand how the logic behind the selected interest rate in net receipt calculation.
We are net borrower and calculate net receipt rate of the collar. This is basically 1 call option and 1 pull option.
Clear that we have a net of 2 premiums to pay (the aim of the collar is to reduce the premium to pay), and that on that aspect, choosing one cap or another will impact the result.
Now for interest rate selection in the calculation, it seems to come from the call strike price (the floor option), which defines the minimum interest rate we will receive. Choosing one cap (put strike) or another has no impact on this interest rate ? Why don’t we have anemone variable in this calculation ?
Thanks for your kind help.
