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Hey All,
Just wondering did anybody contact the ACCA about the bank loan variable rate not being given in the September exam?
I think it was question 31. When asked to calc the WACC they just said the bank debt was variable but neglected to give the rate.
I assume loads of people have already said it to them but just wanted to check. If not I will flag it for them so that it is corrected for future exams.
I have not seen the question because the ACCA have not published it. However if there was other long-term borrowings (such as loan-notes) then you would use the interest yield on the loan notes (after tax) as being the cost of the bank loan.
Hi John.. thanks for replying personally. Appreciate it.
I don’t see how other loan notes would have the same cost of debt as a variable bank loan however. It just wouldn’t happen often enough in the real world to be the rule for an exam.
Have they done this in the past? I didn’t see any on past papers.
In all honesty it looks like they just made a bit of a balls of the question.I can see some logic to doing as you suggest in the exam. I was thinking of doing this exact thing but really it doesn’t make sense to me. Not all debt has the same cost. That’s why we calculate the WACC. To get the weighted average!
I ended up just giving the bank loan a rate of 4%. This seemed to be the standard from the practice questions I did and then worked out the question using that.
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