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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Financing by Debt
In June 2018:
Tin Co needs to raise $2m.
If debt is used, Tin Co will issue 20,000 8% loan notes with a nominal value of $100 per loan note.
In September 2020:
Spine Co is looking to spend $15m to expand its existing business.
If debt is chosen, the company will issue $15m of 8% loan notes at their nominal value of $100 per loan note.
When calculating the Finance Charges, in the answers they are worked out differently:
For Tin Co it is 20,000 x 8% x $100 = 160,000
For Spine Co it is 15m x 8% = 1.2m
Why is the nominal value of $100 used in Tin Co, and not used in Spine Co?
Thank you.
It’s the same
2m * 8%
Or
20000 * $100 = 2m