- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
- You must be logged in to reply to this topic.
Instant Poll - Read and post comments:
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Hello, can you please explain with more details these questions? Thans you in advance
You will have to say what more detail you want!
If it is not too much trouble, more detail calaculation.How did they get those numbers, because I am stuck with this question.Did watch lectures all the way. Thank you!
If you have watched the lectures then I do not understand what the problem is, because I work through a very similar example in the lectures.
The conversion is to 8 shares in 7 years time. The shares have a current MV of $10.90 and the share price is expected to grow at 6% per year.
So in 7 years time the price will be 10.90 x (1.06^7) and the conversion value is 8 times this.
For question 18, the market value is the PV of future receipts discount at the investors required rate of return. The receipts on $100 nominal are interest of $8 per year for 7 years (because the question says they are 8% loan notes) and then the conversion amount of $126.15 given in the question. These are discounted at the 9% given in the question.