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Dear John,
Initially I thought that the debt treatment in this question (part b) would be of ‘amortised cost’, but it was not to be.
could I not amortise this debt?
Regards
But why do you want to?
The question says that the interest will be payable at the end of each year, and that they will repay $3M each year.
Dear John,
Thank you for getting back to me.
I guess all I am driving at is to find out why amortised cost would be wrong.
How different is this debt from one that I should have to amortise?
If I could think of it in such a simple manner like the examiner did with this debt it would be great.
Kind Regards
Because the question specifically says that the interest is payable each year and that they repay $3M each year – don’t make the question harder than it already is 🙂
(And I really cannot remember a question where you were asked to amortise in P4)
Right. I guess I am thinking out of line with this part.
Thank you so much for making it more clearer.
Regards
Hi John
Why do we have to take 65000 in the first year and not 16m (12+4) as these are the funds that bank will lend? The question also says that Tyche MV is 81m if proteus cancels its current loan. What does this mean?16M is not what the bank will lend – it is what the managers and the venture capitalist provide.
The question says that the bank will lend the balance of the required funds. Since they need 81M, the balance from the bank is the remaining 65M.
Tyche currently has a loan outstanding. Proteus are going to sell Tyche without the loan (they will take it over).
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