[Logan]

Hi John,

Thank you very much for all your help and assistance.

For further queries I will use the Tutor Forum.

Thanks again

[Logan]

After working out the working provided in the above link (NPV including inflation), can I work out the payback period calculation as well? Or is it considered as an incorrect practice?

Thanks

[Logan]

Dear John,

Thank you for your input.
As you suggested, I revised my answer.

https://www.dropbox.com/s/uqxi1jvi7b6brmo/OpenTution_Answer.xlsx?dl=0

Thanks

[Logan]

Dear John, thank you for your reply. I have followed the lectures which have assisted me in completing the NPV. Unfortunately I cannot post the answer here because it is in tabular format, but would appreciate if you take a look at my answer which can be found by accessing this link: https://www.dropbox.com/s/mtphrgdimeltdeh/OpenTution_Answer.xlsx?dl=0

Hopefully I got this right so I can feel confident in sitting for F9!

Thanks

[Logan]

I will have to do more research on bank loans, but intermittently from other sources it seems that bank loans should be included in WACC. But I still need to establish this is a fact.

On Market Risk Premium I agree 🙂

Is ACCA f9 particularly based on Financial Statements?

[Logan]

Hello, I was also wondering why you did not consider the 9% bank loans as a source of capital? If you take a look at this post – https://opentuition.com/topic/wacc-2/

you could tell that bank loans, as a source of capital should be included in the WACC.

[Logan]

Hello, so I sat down and compared my workings with yours and have the following comments.

__________________________________________________________________

Comment 1: I used a different Cost of Equity formula. If you take a look at https://termsexplained.com/832766/cost-of-equity there are two formulas;

Formula 1: Cost of Equity = Risk Free Rate + Beta Coefficient × Market Risk Premium

Formula 2: Cost of Equity = Risk Free Rate + Beta Coefficient × (Market Rate of Return ? Risk Free Rate)

Whereas you used Formula 1, I used Formula 2 and the Cost of Equity is quite different using the two formulas.
_____________________________________________________________

Comment 2: I worked out the IRR (or YTM) formula to determine the rate the bonds would fetch if they were issued today;

YTM = (C + ((F – P) / 2)) / ((F + P) / 2)

Where
C = Interest Payment minus tax i.e. 6.3%
F = Face Value of debenture i.e. 100
P = Current debenture price i.e. 105
n = Years to maturity i.e. 6

I got 5.33%

May you please explain your IRR working, and why you used your approach?

[Logan]

Thanks for the very very fast reply. I’m impressed.

Let me compare your workings to mine and follow your logic, and see were I went wrong.

[Logan]

Well done 🙂 … what amount of study do you put in per week and do you work in accounts?

[Logan]

shanbhusal thanks for your input too. I appreciate the fact that some explanation needs to be done.

Parrot learning is just writing a definition as is from a text book, explanations are different – you apply what you learn to describe something.

[Logan]

Thank you I appreciate your comments. No need to worry 🙂

[Logan]

<cite>@keyboard said:</cite>
p1(100%) , p2 (50%) , p3 (75%) , p4 (40 %) , p5 (dont know) , p6 (50%) , p7 (100%)
f4-100
f5-50
f6-50
f7-75
f8-100
f9-75

learning percentages

Are these percentages of learning by heart? I was under the impression that Accounts is something logical. Guess I was wrong 🙁

[Author]

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