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dec 2011 q4 part b,c

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › dec 2011 q4 part b,c

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.
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  • March 3, 2014 at 11:24 pm #161403
    aishaasad
    Member
    • Topics: 159
    • Replies: 185
    • ☆☆☆

    hello Sir’
    i dont understand that how is nominal value of bonds redeemed is callculated as $80 million i thought nominal value to be $100.
    moreover in part c why is 49 million ,the old profit after tax is used to calculate the revise interest coverage ratio and not the revised PAT.
    thankyou

    March 4, 2014 at 10:26 pm #161474
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    The nominal value is $100 per unit (per bond). Each unit has a market value of $112.50.

    The company is using the 90 million to buy back bonds at the market value of 112.50 each. So the number they will buy us 90M / 112.50, and the total nominal value will be (90M / 112.50) x 100.

    For part c, interest cover is always calculated using profit before tax – it would be meaningless to use profit after tax.

    Also, there is no revised profit before tax – the company is using the money to buy back bonds, and so all that changes is the interest to be paid.

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