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Hello,
In my answer to part a, I took account of the expected level of irrecoverable debts when calculating the cost pa of offering the discount i.e. $4m x (1 – 0.026) x 2/3 x 0.01 = 25,973 (rather than 26,667 per the answer in the back).
It wouldn’t effect the investment decision either way, but is there a reason why this isn’t included? Or am I just being pedantic!
Alastair
Its a good point and if you have done this then you will still get full marks.
The examiner tends not to do this, but there is a good argument for what you have done and the examiner has made it clear that you would get full marks whether or not you take account of the irrecoverables when calculating the discount.
Thanks for clearing that up John. Big fan of Open Tuition, keep up the fantastic work 🙂
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