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Q 36. Cost of Capital, from BPP Revision Kit – Market value of loan stock?

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Q 36. Cost of Capital, from BPP Revision Kit – Market value of loan stock?

  • This topic has 3 replies, 2 voices, and was last updated 12 years ago by accaforall.
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  • October 15, 2012 at 5:07 pm #54713
    accaforall
    Member
    • Topics: 5
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    Can any one clarify the below please!
    From BPP revision kit Q 36 (I). calculation of WACC if share price if 470 and no conversion takes place: the question has stated the maket value of the $100 Million 8% loan stock as $110. However, in the calculation of the WACC the current price is calculated ($96.72) using the 9% GRY.
    I am confused about using MV or current price? what is the difference?

    October 16, 2012 at 2:37 pm #105601
    Anonymous
    Inactive
    • Topics: 0
    • Replies: 3
    • ☆

    mv is actualy the market price which may be current price at a particular time.take for example the share price is $1/s for Z ltd today then the current price may be said to be $1/s

    October 16, 2012 at 2:42 pm #105602
    Anonymous
    Inactive
    • Topics: 0
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    usualy the current price will take a form of a discounted present value. hence the $96.72 is the present value of the securities.

    November 2, 2012 at 10:08 am #105603
    accaforall
    Member
    • Topics: 5
    • Replies: 17
    • ☆

    @edward2012 said:
    usualy the current price will take a form of a discounted present value. hence the $96.72 is the present value of the securities.

    THANKS, its quite clear now

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