[hughlan]

Hi John.. thanks for replying personally. Appreciate it.

I don’t see how other loan notes would have the same cost of debt as a variable bank loan however. It just wouldn’t happen often enough in the real world to be the rule for an exam.

Have they done this in the past? I didn’t see any on past papers.
In all honesty it looks like they just made a bit of a balls of the question.

I can see some logic to doing as you suggest in the exam. I was thinking of doing this exact thing but really it doesn’t make sense to me. Not all debt has the same cost. That’s why we calculate the WACC. To get the weighted average!

I ended up just giving the bank loan a rate of 4%. This seemed to be the standard from the practice questions I did and then worked out the question using that.

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