The cost of capital - Cost of debt - ACCA Financial Management (FM)

The cost of capital - Cost of debt - ACCA Financial Management (FM)
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[@blackm9063]

Thank you

[@KajaKopczynska-x2m]

At the exam, would you say presenting ability to calculate IRR manually would gain us points, or we can just go with IRR formula?

[@margaretnjenga2181]

Please explain the part where you got the Present value anuity factor for 10% as 0.621.

[@opentuition]

There is no annuity as regards the redemption. The redemption is in 5 years time and so needs discounting for 5 years. 0.621 is the discount factor for 5 years at 10%. It is only the interest each year that is an annuity.

[@opentuition]

If you have any more questions in the future then please ask in the free Ask the Tutor Forum on our website. We are not able to monitor and therefore answer all questions posted here.

[@lessthan90degree]

Thank you so much,so well explained

[@opentuition]

Thank you for your comment :-)

[@salimaalbalushi4456]

you are the best

[@opentuition]

Thank you for your comment :-)

[@mikeyy1916]

Where is the question ? The notes have been updated and have different questions now

[@opentuition]

No - that is not the case. This lecture is going through the second part of the chapter on the cost of capital.

[@abi71200]

shouldnt the 6% be tax deductable? 6 x 0.7 = 4.2 ?

[@opentuition]

I assume that you are referring to example 8. For part (a) which is asking for the return to the investor, company tax is irrelevant because it does not affect the investor. For part (b) which is asking for the cost to the company then we do take the after tax interest of 4.20. I do explain this in the lecture, and also the printed answers in the free lecture notes show this.

[@poojatripathi1138]

Why discount factor at 10% and 15%?

[@mohamedmubeen1739]

To find IRR. Which helps us to give NPV in zero. refer his video of chapter 7.

[@mainifester1668]

@@mohamedmubeen1739 But how do they take 10% and 15% do they assume or it is given in question? i am not getting it

[@albina8722]

@@mainifester1668 so can someone asnwer to this question? T-T is it assumed or given?

[@mikeyy1916]

@@albina8722 assumed

[@joyce3073]

Just assuming, any two rate can calculate IRR.