updates for acca paper f9 031210

8/2/2019 Updates for ACCA Paper F9 031210

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UPDATE SHEET

ACCA F9 Financial Management, Complete text, Dec 2010 Edition.

ISBN: 978-1-84710-951-4

Chapter 3 page 83

Error: (TYU 8 - Answer)

(4) Step 3: Calculate the PV – 14,000 × 8 = $112,000

Correction: (TYU 8 - Answer)(4) Step 3: Calculate the PV – 14,000 × 9 = $126,000

Page 84


(3) Step 3: Calculate the PV – 149,985 × (1/1.122) = $122,988

Correction: (TYU 9 - Answer)




Correction: (TYU 9 - Answer)


Chapter 11 page 321

Error: (Illustration 2 - IRPT)

Any attempt to ‘fix’ the future.....................(see chapter 23 for details)), will also fail.

Correction: (Illustration 2 - IRPT)

Any attempt to ‘fix’ the future.....................(see page 327)), will also fail.

Page 329

Error:

Since forward exchange rates are derived.....................interest rates (see chapter 23), the end

result....................the same by either method.Correction: (Illustration 2 - IRPT)

Since forward exchange rates are derived.....................interest rates (see page 320), the endresult....................the same by either method.

Chapter 19 page 580

Error/correction: (TYU 12)

Question:

The question should state that the bond may be converted on that date into 30 ordinary shares of thecompany (not 25 as stated currently)



Page 601

Error/correction: (TYU 12 revised answer)

Answer:

i. Market value

Expected share price in three years' time = $3.30 × 1.053

= $3.82

Conversion value = $3.82 × 30 = $114.60

Compared with redemption at par value of $100, conversion will be preferred.

The current market value will be the present value of future interest payments, plus the present value of theconversion value, discounted at the cost of debt of 6% per year.

Market value of each convertible bond = [($100 × 8%) × 3yr 6% AF] + ($114.60 × 3yr 6% DF)

= ($8 × 2.673) + ($114.60 × 0.840)

= $21.38 + $96.26

= $117.64

ii. Floor value

The current floor value will be the present value of the future interest payments, plus the present value of theredemption value, discounted at the cost of debt of 6% per year.

Floor value of each convertible bond = [($100 × 8%) × 3yr 6% AF] + ($100 × 3yr 6% DF)

= ($8 × 2.673) + ($100 × 0.840)

= $21.38 + $84.00

= $105.38

iii. Conversion premiumCurrent conversion value = $3.30 × 30 = $99.00

Conversion premium = $117.64 — $99.00 = $18.64

This is often expressed on a per share basis, i.e. $18.64 / 30 = $0.62 per share.



UPDATE SHEET

ACCA F9 Financial Management, Recorded lecture.

Error/correction

In the Cost of capital recorded lecture, page 7

It says that the current divided = 10p x 1.10 x 1.10 x 1.10 x 1.10 = 13.31

But this actually equals 14.641

Error/correction

Key topic 3 - Cost of capital

Page 19/19, the presenter works through TYU 13 from Chapter 18. This question is very similar to TYU16from Chapter 15 within the Dec 2010 text but there is a small difference relating to the market value of theredeemable loan notes. In the version used in the lecture, the market value is par. In TYU 16 in the currenttext, the market value is $105. As a result the answers differ. Both are correct.

updates for acca paper f9 031210

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