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Bento Co (Jun 15) – Debt calculation

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Bento Co (Jun 15) – Debt calculation

  • This topic has 0 replies, 1 voice, and was last updated 1 year ago by madhuap.
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  • November 30, 2021 at 5:23 pm #642137
    madhuap
    Member
    • Topics: 4
    • Replies: 13
    • ☆

    Hello John,

    I want to seek your support to understand a specific case here (Question: Bento Co (Jun 15))

    I was trying to understand part (b) question and answer. Out of 2 loans only first loan and interest were considered to work out the total debt.

    1. $30m loan at 8% and interest payable annually based on the loan outstanding balance at the start of each year and repaid on fixed equal annual payments.

    2. $20m loan at 6% convertible bond on which interest is payable annually. Conversion may be undertaken on the basis of 50 Equity shares for every $100 from the beginning of year five onward.

    Should I understand that loan 2 ($20m) will be converted into equity after year 4 and hence should not be considered for debit calculation?

    You have already addressed this in the past, please help me to get the link for further reading.

    Thank you!
    Madhu

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