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Zhichi SD 2021

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Zhichi SD 2021

  • This topic has 3 replies, 3 voices, and was last updated 2 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 2, 2023 at 1:29 pm #679974
    bucky709
    Participant
    • Topics: 19
    • Replies: 14
    • ☆

    Issue Costs:
    3/97 x $80m = $2.5m

    Tax shield:
    Annual interest payable = $80m x 0.03 x 0.2 = $0.5m

    Are not we supposed to use the gross amount 82.5m while calculating the interest payable? I have seen a number of questions where the interest is calculated on net amount.

    am i missing something?

    thankyou

    March 3, 2023 at 6:52 am #680011
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54670
    • ☆☆☆☆☆

    You are correct, and doing that would have got full marks 🙂

    May 18, 2023 at 4:57 pm #684613
    Spiro
    Participant
    • Topics: 11
    • Replies: 42
    • ☆☆

    Just to clarify further, I add an extract from this question:
    “Issue costs, which need to be paid, are anticipated to be 3% of the gross finance. Issue costs are not allowable as a tax-deductible expense”.

    The examiner’s answer for issue costs is 3/97 x $80m = $2.5m (without rounding 2.474$m).

    Is it one and the same, if I gross up the financing and calculate the issue costs in the following way: 3% x 1.03 x $80m = 2.472$m?

    May 19, 2023 at 9:05 am #684641
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54670
    • ☆☆☆☆☆

    Yes, it is the same.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Zhichi SD 2021’ is closed to new replies.

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