[tasnuva]

and sir yield to maturity is increasing. how is this a good signal?

[tasnuva]

Also sir, why is in part c,

Receipt from swap = 1044? I didn’t understand why we are including 715m and 329m here?

And how is predicted exchange rate at year 3 $7.6046 = €1

[tasnuva]

3. If the hedging was for money being received then we would have chosen the highest spot rate right?.

[tasnuva]

Thank you sir!! You are literally a blessing!!! Thank you

[tasnuva]

I understood my question 1 and 2. Kindly answer the others when can 🙂

[tasnuva]

Oh I thought it’s a sunk cost. Thank you

[tasnuva]

Ok I got it. The question said that it’s a tax allowable expense hence we included it. My question is had the question not mentioned of any such thing, would we have excluded this expenditure?

[tasnuva]

2. What is the formula for calculating the effective interest rate on option hedging technique?

[tasnuva]

2. June 2002, Strayer Inc, why was the issue costs not calculated like this :
Debt : $5m * 1/99
Equity: $10m * 4/96

Also why was the PV of issue costs not calculated?! Is it because they mentioned that these costs are not tax allowable?!

[tasnuva]

5. Sorry to bother again, but I have a question regarding the calculation of financing side effects in the same question.

In the calculation of annual subsidy effect, why did we use 2.5% and not 1.5%(2.5% – 100 basis points) ?!

[tasnuva]

4. Also, in the same question , to determine the discount rate we calculated the asset beta first . But we used the equity and the debt value of Lintu Co for that. Did we use Lintu Co ‘s value because we didn’t know the equity value of Burung Co or do we ALWAYS use the proxy companies equity and debt value to determine asset beta?

[tasnuva]

Also, why is the capital allowance in year 4, $0.5??

[tasnuva]

Ok I got my answer. But why did they not include the tax allowable depreciation in the main calculation? Do I have to include it in the workings only and not in the main calculation ?!

[tasnuva]

Thank you so much!! That helped a lot

[tasnuva]

2. In order to determine taxable cash flows we subtract tax allowable depreciation first. But in Dec 2003, AVTO (found the question in Kaplan question paper), it was not done. Why so?

[Author]

Posts