• 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 >>

Chapter 17 Example 10 of the lecture notes

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Chapter 17 Example 10 of the lecture notes

  • 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 13, 2021 at 12:20 pm #637616
    Emmanuel Mashaya
    Participant
    • Topics: 3
    • Replies: 1
    • ☆

    Hie there John again.

    I think there is a printing error with the answer from Example 10 of the lecture notes.

    I have correctly calculated my Equity required rate of return to be 14.75% and I have calculated my Debt required rate of return to be 10.1355% (I ignored the effects of Tax in my IRR computation) using discounting factors of 10% and 12% , without deducting Tax for Interest payments.

    For the WACC I can see that there might have been a mix up with the answer from Example 9,as the Market Values for this exercise for Equity and Debt from my calculations were $32 million ($3.20*10 000 000) for Equity and $6.3 million (1.05*6 000 000) for Debt.

    *However having ignored Tax in my computation of Debt required rate of return , my *Kd* in the WACC formula was net of Tax (30%) ,basically 10.1355%*(1-0.3)= 7.09485% (I DONT KNOW IF THIS IS ACCEPTABLE OR NOT)*

    October 13, 2021 at 4:05 pm #637624
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    You are correct in saying that there is a typing error in the printed answer to that question and I will have it corrected.

    The correct WACC is 13.56% as is in the lectures working through this chapter.

    What you write in your last paragraph is not acceptable. As is written in bold at the end of the chapter (and as I stress in the lectures), when it is redeemable debt we calculate the cost of debt as the IRR of the after tax flows, and not as Kd(1-T).

    (It seems as though you might be using the notes without watching the lectures. If so, then that is pointless because it is in the lectures that I work through the examples and also explain and expand on the notes. They are lecture notes and are not meant to be a Study Text.)

  • 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

  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on Linear Programming – Maximum contribution – ACCA Performance Management (PM)
  • d.kabulova on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • alin.sivi on Linear Programming – Maximum contribution – ACCA Performance Management (PM)
  • John Moffat on Time Series Analysis – ACCA Management Accounting (MA)

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