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Hi Sir
With regards to the calculation of EPS under First directors proposal, I don’t understand why 6.2% has been used to calculate interest saved on $96m loan paid off.
Below are my calculations but I can’t figure out what I have missed.
Interest rate without the proposal is 3.8% + 0.9 basis = 4.7%
after tax rate @ 20% = 3.76%
interest rate savings = 96000 X 3.76% = 3610savings on 24m remaining loan would be 30 basis point due to change in credit rating
After tax savings = 24000 x 0.3% x 0.8 = 57.60total interest savings = 3667.60
thank you
From the SOFP given in the question, they are paying 6.2% (before tax) on the existing bonds.
The first director proposes paying off some of those bonds and therefore interest will be saved at 6.2% on the nominal value.
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