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8% $5m convertible loan note.how to compute the finance cost unwind discount $475k ? many thanks
Calculate the present value of the debt of 5m to be paid in 3 years’ time at a 10% discount rate, add on the present value of the interest to be paid over the next three years. The two combined amounts equal the liability element of the mixed or compound instrument.
Then, as each year goes by, unwind the discount by the same rate at which you discounted it ie, at 10%.
I think you should arrive at 475k
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