• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

164 Vyxyn Co (Mar/Jun 17) BPP Kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › 164 Vyxyn Co (Mar/Jun 17) BPP Kit

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 18, 2021 at 4:43 am #638099
    whateveritis
    Member
    • Topics: 11
    • Replies: 5
    • ☆

    Dear Tutors,
    I have a little problem with this question.
    In the question, it says that “It is planned to finance the investment project with an issue of 8% loan notes, redeemable in ten years’ time. Vyxyn Co has a nominal after-tax weighted average cost of capital of 10%, a real after-tax weighted average cost of capital of 7% and a cost of equity of 11%.”
    They list out a bunch of rates which confuses me. Can you explain what these mean and why the answer chooses cost of capital 10% as the rate to calculate the NPV of the whole project?
    Please help me.
    Thank you in advance.

    October 18, 2021 at 8:20 am #638158
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    I will telly what they all mean, but for a full understanding you really need to watch my free lectures on the cost of capital and on investment appraisal with inflation – you cannot expect me to type out all the lectures again here 🙂 ). All of these terms are very relevant in almost every exam.

    The 8% loan notes means that the company is paying 8% interest each year on the nominal value, until the repayment in 10 years time.

    The weighted average cost of capital is the overall cost of capital for the company (the average of the cost of equity and the cost of debt borrowing).

    The nominal cost of capital is the actual weighted average cost of capital, whereas the real cost of capital is the weighted average cost of capital if there was no inflation. (Higher inflation makes the nominal cost of capital higher).

    We discount the nominal cash flows (i.e. the actual cash flows including inflation) at the actual or nominal cost of capital.

    Again all of this is explained in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • jcacca15 on PPE – Introduction – ACCA Financial Reporting (FR)
  • jcacca15 on PPE – Introduction – ACCA Financial Reporting (FR)
  • shazleen on ACCA AB Chapter 10 – Management – Questions
  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on Linear Programming – Maximum contribution – ACCA Performance Management (PM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy