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- This topic has 1 reply, 2 voices, and was last updated 13 years ago by MikeLittle.
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- May 30, 2011 at 5:22 am #48770
At the start of the current year heston issued $80 million 8%
convertible loan stock at par. the stock is convertible into equity
shares, or redeemable at par , in 5 years
time ,at the option of the stockholder . the term of conversion are
that each $100 of loan stock will be convertible into 50 equity shares
of heston . A finance consultant
has advised that if the option to convert to equity had not been
included in the terms of issue , then coupon ( interest ) rate of 12%
would have been required to attract subscribers for the stockthe value of $1 receivable at the end of each year at a discount rate
of 12% can be taken as ;year $
1 0.89
2 0.80
3 0.71
4 0.64
5 0.57required ; to calculate the I/s finance charge for the current yr and
SFP at yr end in respect of the convertible loan stockso please make reply on question how to solve
with kindly ;
bony
June 1, 2011 at 3:26 pm #82679Calculate the present value attached to the $80m loan, deduct from $80m, and the balance is shown in equity.
But is that not what the printed answer has done?
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