{"id":495,"date":"2014-06-20T16:12:13","date_gmt":"2014-06-20T16:12:13","guid":{"rendered":"http:\/\/zh.aceessays.com\/tc\/?p=495"},"modified":"2016-11-08T15:50:10","modified_gmt":"2016-11-08T15:50:10","slug":"redeemable-bonds","status":"publish","type":"post","link":"https:\/\/www.aceessays.com\/tc\/redeemable-bonds\/","title":{"rendered":"Redeemable bonds"},"content":{"rendered":"<h3>Redeemable bonds<\/h3>\n<ul>\n<li>The cost of debt of redeemable bonds is the internal rate of return of the valuation model on the previous slide.<\/li>\n<li>Using this model to find the after-tax cost of debt is more accurate than multiplying the before-tax cost of debt by (1 \u2013 CT), since the redemption value is not tax-deductible.<\/li>\n<li>The cost of debt can be found using linear interpolation or a financial calculator.<\/li>\n<\/ul>\n<h3>Redeemable bonds<\/h3>\n<ul>\n<li>Hawanini-Vora bond approximation model can also be used to calculate cost of debt:<\/li>\n<\/ul>\n<p>I + (P \u2013 NPD) Kd = n P + 0.6 x (NPD &#8211; P)<br \/>\nI = interest payments (\uffe1)<br \/>\nP = par value (\uffe1100)<br \/>\nNPD = ex interest market value (\uffe1)<br \/>\nn = number of years to maturity<\/p>\n<h3>Redeemable bonds<\/h3>\n<p>Using the Hawanini-Vora model:<\/p>\n<ul>\n<li>11% redeemable bond (I = 11, P = 100)<\/li>\n<li>Ex interest market price of \uffe195 (NPD = 95)<\/li>\n<li>Redemption in five years\u2019 time (n = 5)<\/li>\n<\/ul>\n<p>11 + (100 \u2013 95) Krd = 5 = 12.4% 100 + 0.6 x (95 &#8211; 100)<\/p>\n<ul>\n<li>After-tax cost of debt = 12.4 x 0.7 = 8.7%<\/li>\n<\/ul>\n<h3>Bank borrowings<\/h3>\n<ul>\n<li>Bank borrowings are not traded and have no market value that interest can be related to.<\/li>\n<li>Cost of bank borrowings can be found by dividing average interest paid by average borrowings for a given period.<\/li>\n<li>Alternatively, the cost of traded debt may be used as a best approximation.<\/li>\n<li>Appropriate adjustments for taxation is needed.<\/li>\n<\/ul>\n<p>How to write an essay: <a href=\"http:\/\/www.aceessays.com\/tc\/\">\u8ad6\u6587\u4ee3\u5beb<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Redeemable bonds The cost of debt of redeemable bonds is the internal rate of return of the valuation model on the previous slide. Using this model to find the after-tax cost of debt is more accurate than multiplying the before-tax cost of debt by (1 \u2013 CT), since the redemption value is not tax-deductible. The cost of debt can be found using linear interpolation or a financial calculator. Redeemable bonds Hawanini-Vora bond approximation model can also be used to calculate cost of debt: I + (P \u2013 NPD) Kd = n P + 0.6 x (NPD &#8211; P) I = interest payments (\uffe1) P = par value (\uffe1100) NPD = ex interest market value (\uffe1) n = number of years to maturity Redeemable bonds Using the Hawanini-Vora model: 11% redeemable bond (I = 11, P = 100) Ex interest market price of \uffe195 (NPD = 95) Redemption in five years\u2019<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":["post-495","post","type-post","status-publish","format-standard","hentry","category-notes"],"_links":{"self":[{"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/posts\/495","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/comments?post=495"}],"version-history":[{"count":1,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/posts\/495\/revisions"}],"predecessor-version":[{"id":1524,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/posts\/495\/revisions\/1524"}],"wp:attachment":[{"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/media?parent=495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/categories?post=495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aceessays.com\/tc\/wp-json\/wp\/v2\/tags?post=495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}