Hi sir,
In this question, me and my friend are having an argument over the answer
A company can SELL 15 year 14% debentures of face value of $1000 for $970. Additionally, an underwriting fee of 1.5% of the FACE VALUE will be incurred by the company. Redemption value is $1000.
My answer : 16% (Rounded off)
His answer : 14.72%
Please help
P.S- Sorry, I posted this question on the general forum as well by mistake
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Cost of Redeemable Debt
9y ago#1Firstly, why on earth are you attempting questions for which you do not have an answer? You will only pass the exam if you practice questions from one of the Revision Kits published by the ACCA approved publishers. They have answers to the questions, and explanations.
Secondly, this is not the sort of question that will be asked in the Paper F9 exam.
Thirdly, you have not said what is required!! If it is the return to investors, then the underwriting fee is of no relevance. If it is the cost of the debt to the company, then what is the company tax rate?
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