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It’s going to be a week since i posted that ques …
pls reply to it as asap ..
Please !!!
so does this mean, that we’re supposed to calculate the balancing allowance whenever they tell us to find the tax relief on a ” straight line method ” and when they also mention that ” tax will be paid in arrears” ?
So I’m assuming we take the same value of tax relief ( on a striaght line method ) for all years when the question only mentions that tax is payable on the same day transaction occurs ( meaning not in advance nor in arrears , just the same day )
Pls lemme know <33
Yes i was doing Telford , tho this was just a common doubt
anyways
thank u lotsss and lotssAt t0 / t1-3 //////////t4
(100) / (10) (10) 10 / 110. Required extra for 2 years and a little lessAt t0 / t1-3 /////////////t4
(100) / 10, 10, (10)/ 90 Required less for 2 years and a little moreFor both of these , can you explain why you are adding and deduting the values ?
Ik that we’re supposed to deduct it , but i dont understand why your’e adding themthank uu
Is it because the question say’s that ordinary shares are in “ISSUE” with the nominal value ?
Is that why we don’t divide it by the nominal value since it’s aleady in nominal terms because it’s an ISSUE of 226m ?Oh yeah sorry , I meant cost of debt
The calculation which I did was using spreadsheet using the IRR function which is available in the spreadsheet just like how the sum function is available.
When calculating the cost of debt using IRR formulae , on what basis do we decide and take the two % when discounting the interest value and reedemable value ?
Pls answer the above
Reedemable loan note COE working
Y0 –(103.50) given market value
Y1—6.40 –(8 interest*0.8tax)
Y2—6.40
Y3—6.40
Y4—6.40
Y5—116.40–(6.4+110 ( 10% redeemed at nominal value of 100 ) )
Cost Of Equity–7.27%Using the spreadsheet IRR function i’m only getting 7.27% whereas the mark shceme answer COE to the question is 7.44%
Can you please tell me what mistake i am making here , since the mark scheme also does not state about COE answer being rounded off , they only gave a single answer which is 7.44%
years Trade-in value Maintenance cost
$ $
1 1200 Nil
2 800 75(payable at end of Year 1)
3 To be determined 150 (payable at end of Year 2)These are the trade in values given
I tried formating it however when i send , it just becomes messy looking :/It’s from ACCA study hub
That’s the exact question from the study hub including all infoI understand why we divide the nominal value from the preference shares but i don’t undertsand why we have to multiply it again ?
Please lemme know
The correct answer is B.
Preference dividend = 0.50 × 0.06 = $0.03 per share
Preference share value per share P0 = 0.03/0.08 = $0.375 per share
Number of shares = 10/0.5 = 20m
Total market value = 20m × 0.375 = $7.50mAre they multiplying the preference shares of 6% with the nominal value of 0.5 since we’re only supposed to find the MV of the IRREDEEMABLE SHARES ?
I’m sorry if it doesn’t make senseCan you please explain me this question too
A company currently has 1,000 ordinary shares in issue and no debt. It has the choice of raising an additional $100,000 by issuing long-term debt at a 9% annual interest rate, or issuing 500 ordinary shares. The company has a 40% tax rate.
What level of earnings before interest and taxes would result in the same earnings per share for the two financing options?
The answer is 27000.
WORKING
Equity Debt
EBIT 27,000 27,000
Interest expense 0 (9,000) (100,000 × 9%)
Profit before tax 27,000 18,000
Taxes (40%) (10,800) (7,200)
Net income 16,200 10,800
÷ Shares outstanding 1,500 1,000
EPS $10.80 $10.80Oh okay
In case we get a question like this in exam , pls let me know which method I’m supposed to followA 5% $100 loan note will be repaid at its nominal value after one year. The before-tax cost of debt of the loan note is 4% and the corporate tax rate is 30%.
What is the current market value of the loan note (to the nearest $)?
This is a very similar question to the above , however they aren’t doing the same method for it and why is that ?
The given answer is :-
The market value of a loan note equals the present value of its future cash flows discounted at the before-tax cost of debt.
105 /1.04? = $100.96 i.e. $101 to the nearest $.
