ACCA Financial Management (FM/F9) Debrief of Tanza Co M/J 2022

This is my full debrief of Tanza Co the past exam from March/June 2022. Hopefully this is helpful to all you FM students out there. Please let me know. We all love feedback !!

[@ragnar6919]

I didn't understand why $0.90 is not subtracted from $5.50 to come up with EX div price 4.6. Why are we assuming $5.50 as ex div price ?

[@jotuffillacca]

The examining team would clearly tell you the share price was cum div. Here it says a dividend has recently been paid, so it is ex div.

[@ragnar6919]

​@@jotuffillacca thank you mam for your help.

[@naumandhamaskar]

@jotuffillacca maam could you please tell me the important chapters that can be asked for FM Sec C

[@jotuffillacca]

Working capital, investment appraisal and business finance

[@IfraAnware-fp6gp]

Good evening mam. Mam I have question based on section A cost of capital chapter. Mam if in the question, we are given 5% secured redeemable bonds with the required return of 6% and corporation tax being 30%. And we are told to calculate market value of redeemable bonds only. Mam my question is that the 5% interest rate that I am considering is after deducting tax by (1-30%). But however in the answer they are calculating without considering the tax of (1-30%). As a result of which my answer is wrong. Can u plz explain me mam when exactly I should take into account the tax rate or ignore it. I have been making this mistake in lot of Sec A & Sec B questions specifically. Can u plz please give trick to help me understand this concept. Thank you.

[@jotuffillacca]

You are confusing the tax issue. You only take off corporation tax if you are calculating the cost of debt. Here you are calculating the market value of the debt to the investor. The investor doesn't pay corporation tax. So no tax deduction and use the pre tax rate.

[@IfraAnware-fp6gp]

@@jotuffillacca Thank you so much mam 👍

[@user-xk5ds5zi3b]

why are u using 10% we usually use after tax interest rate na????

[@jotuffillacca]

I am using the IRR function that automatically calculates the IRR .. you need to learn how to use it . This is not linear interpolation. You layout the cashflows as a NPV and then highlight them and make a guess.. I have just used 10%. You can use any %. The key is getting the cashflows laid out correctly

[@jotuffillacca]

I do use the. After tax to calculate the interest post tax

[@preetichugh9393]

Why you used 10 percent not 5percent??

[@jotuffillacca]

Can you be a bit more specific please ? at what point of the video are you asking this?

[@preetichugh9393]

@@jotuffillacca In kd we mostly use the percentage of loan notes in which it is issued which is here 6% and we use after tax cost of interest which is 5.1 (5%) we discount at around these percentages. But instead you are using 10%..

[@jotuffillacca]

@@preetichugh9393 You can use any % in the IRR function as its a guess. When doing the Interpolation yes its best to get 2 % around the interest rate and near to it but not essential.

[@preetichugh9393]

@@jotuffillacca alright thankyou

[@user-xk5ds5zi3b]

if we use the 5% THEN THE RESULTS WILL BE DIFFERENT IN THAT CASE OF 10%@@jotuffillacca