Hi Sir,
With regard to the Global Sample Question relevant for exams from December 2010 provided in ACCA past papers section, I have the following questions to ask:
With regard to the answer, Appendix 3:
1. Cost of equity = 3 + 2.014 x 6%. Does the 3 represents risk-free rate of return and 6% is the equity market risk premium?
2. WACC = (15.08% x 364)...... How to get the figure of 364?
With regard to the answer, Appendix 2:
1. Black-Scholes Option Pricing
d1 = 0.234
d2 =-0.190
Could you advise the detailed steps on how to find the N(d1) value of 0.0925? It is not shown in the standard normal distribution table.
Thank you in advance!
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Global Sample Question Relevant for Exams from December 2010
12y ago#11) Yes - 3% is the risk free rate, and 6% is the equity risk premium (the difference between the market return and the risk free rate)
2) 364 is the total market value of the equity (104 shares x $3.50)
3) if d1 were 0.23 then the tables give 0.0910; for 0.24 the tables give 0.0948
for 0.234 he has approximated between the two, assuming linearity: 0.0910 + (4/10 * (0.0948 - 0.0910))
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