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Dear Mike,
Could you please explain the loan calculations or please let me know which lecture I need to listen to?
Q:
Triage Co issued 400,000 $100 6% convertible loan notes on 1 April 20X5. Interest is payable annually in arrears on 31 March each year. The loans can be converted to equity shares on the basis of 20 shares for each $100 loan note on 31 March 20X8 or redeemed at par for cash on the same date. An equivalent loan without
the conversion rights would have required an interest rate of 8%.
The present value of $1 receivable at the end of each year, based on discount rates of 6% and 8%, are:
6% 8%
End of year 1 0·94 0·93
2
0·89 0·86
3
0·84 0·79I am clueless from were the 42400 is coming from for 2008 in the solution.
Thanks a million.
Kind regards,
KatalinI can’t find the question Triage on my pc
However, (I also cannot see where $42,000 comes from!) if you set up a working with 5 columns headed “Capital”, “Interest at 8%”, “Subtotal”, “Interest paid”, “Carried forward”
Can you agree the calculation that the loan element of this mixed instrument is $379,383?
OK, that’s the figure to put in column 1 to start the ball rolling
Interest @ 8% is 30,357, interest paid is 24,000, so carry forward is 385,734
Columns 1 – 5 now read:
385,734, 30,858, 416,592, 24,000, 392,592
and then:
392,592, 31,407, 423,999, 24,000, 400,000
Does that help?
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