Q2. Tippletine Co march / june 2018 or mock 3 BPP

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August 23, 2021 at 7:37 pm #632663
tajwartasin
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Issue costs for the subsidised loan and convertible loan notes would be paid out of available cash reserves if that so then why are they grossing up the issue cost?

Issue costs
Debt: ($30,600,000/0.96) = $31,875,000
Debt issue costs: $31,875,000 X 0.04 = $1,275,000

Sir i think this should be,
(30600000*4%)=122400 as this was financed from reserves however if sufficient fund wasn’t available then i believe the examiner approach is correct the above one?
August 24, 2021 at 9:33 am #632721
John Moffat
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You are correct and the examiners answer is wrong – the issue costs should be 1224 and not 1275. You would still have got the 1 mark for this if you had shown the issue costs as being 1224.
August 24, 2021 at 4:29 pm #632774
tajwartasin
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Thank u sir
August 25, 2021 at 8:27 am #632828
John Moffat
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You are welcome 🙂
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