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we are calculating the value of the loan notes and not the cost to the company, thus we wont after-tax it. Its the amount at which the potential buyers value a load note and not the effective cost incurred by the co.
mcq’s will be the key determinant i guess. Cause almost all of us screwed up the section c
sadly, its sales. cash is why there is an operating cycle. The operating cycle is all about the time it takes for us to get cash generated out of our transactions.
No its not. Average trade receivables are to be used and not the year end ones.
firs the disc rt of 9% is used to discount interest cash inflows from the 1 year to the last (8 probably). lastly the redemption value is compared with the conversion value, higher is taken and disc at 9% for 8 yr. add up. tada!
They will step mark you. I think you can expect about 20-30% of the marks for the section c question 32 and about 40% for question 31. hope for the best inshallah.
a question of adding up reserves would only arise when we use book value weights, While using m.v weights were already adding up the reserves (security premium) in the price. so no further need.
no only the highest, we calculate what value we would receive on conversion and redemption and chose the highest, you dont have to calc. the entire cost again. kindly view John’s lecture on valuation of debt.
@tpara said:
What was your answer for WACC?mine was rounded off 12%
@joevika said:
the answer was 20.5%. It was in a practice question i did.could you tell me where you did it? what book? and are you talking about q31?
@coralienana said:
It seemed Easy at thé moment but when reading your answers it looks obvious that i failedI presume the major determinant here will be the mcq’s cause we all messed up the section c
@daisypeg said:
Definitely failed this one last f paper and was hoping for all first time passes :’(dont worry you’ll 100% make it this time. Just watch all of them john lectures over and over and plus practice is imperitive.
@andreea10 said:
Hi everyone. How did you calculate the Market value of the 6% loan note, with a nominal value of 100, cost of capital 9%? Hope I remember the figures right.mv of 6% loan notes is easy to calc. Just disc the interest inflows before tax
(cause youre calc the value and not the cost) then disc em. after that compare the values of redemption and conversion , chose the higher and disc. add the pv’s up and done@amirawasim said:
In question 31 after finding conversion value the loan notes were convertible so i found the cost of debt from them and thats how i got WACC around 5 i dont know if its correct as most of you are saying around 12. I got ex dividend by subtracting current divided from cum dividend and used it to calculate Ve
In the dividend policy part b just wrote about Retention and inflation and limits on dividend distribution is to be considered and exaggerated it.you’ll be step marked. expect around 40% marks in the 31 q and around 20-30% marks in the 32q. Hope you’ll make it through inshallah. ciao
@tpara said:
After reading comments, I guess it will be my second fail 😀dont worry, you’ll make it through. Just hang on. Also, john’s lectures are awesome , do watch them plenty times and practice. if you’d like any more correspondence kindly mail me at kazmi.ht@gmail.com
@sarahb1985 said:
Payback 2.4Not wc – sales
For the wacc convert or redeem were we meant to calculate the cost of debt for both and use the lowest?!
we had to compare what gave us the most value conversion or redemption , it was conversion.
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