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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 Error: (TYU 9 - Answer) (3) Step 3: Calculate the PV 149,985 (1/1.122) = $122,988 Correction: (TYU 9 - Answer) (3) Step 3: Calculate the PV 149,985 (1/1.122) = $122,939 Error: (TYU 9 - Answer) (4) Step 3: Calculate the PV 112,000 (1/1.1259) = $40,432 Correction: (TYU 9 - Answer) (4) Step 3: Calculate the PV 112,000 (1/1.1259) = $38,801 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 end result....................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 the company (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 the conversion 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 the redemption 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 premium Current 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.

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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 TYU16 from Chapter 15 within the Dec 2010 text but there is a small difference relating to the market value of the redeemable loan notes. In the version used in the lecture, the market value is par. In TYU 16 in the current text, the market value is $105. As a result the answers differ. Both are correct.