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01/11/2013 12m convertible loan notes , norminal int 5%, redeemable on 31/10/2016 or converted to equity shares, similar notes without convertionoption 8.6%
year 5% 8.6%
1 0.95 0.92
2 0.91 0.85
3 0.86 0.78initial recognition in FS
cash flow df pV
0.6m 0.92 0.552
0.6 0.85 0.51
12.6 0.78 9.828
so debt $10.89m equity share $1.11m
but the answer is E $59400,D$11940600. could you please point out where I made mistakes?Applying ACCURATE discount factors, I calculate the debt element to be $10,978,638 and equity as the balance of $1,021,362
I can’t see how the solution figures have been arrived at unless it’s another misprint.
Sorry
🙁
Sir
please i dont understand your answer. i got the same figures with wxylhyljf. i used df0.92
0.85
0.78So did I – so then I used absolutely accurate discount factors rather than those that were given (to only 2 decimal places)
Phew! That’s a relief because I got the same answer as wxylhyljf and josy87. Thanks for clarifying, Mike 🙂
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