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plz help this qust

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › plz help this qust

  • This topic has 1 reply, 2 voices, and was last updated 14 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 30, 2011 at 5:22 am #48770
    BONY
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    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 stock

    the 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 0.57

    required ; to calculate the I/s finance charge for the current yr and
    SFP at yr end in respect of the convertible loan stock

    so please make reply on question how to solve

    with kindly ;

    bony

    June 1, 2011 at 3:26 pm #82679
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23318
    • ☆☆☆☆☆

    Calculate 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?

  • Author
    Posts
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