V interest is based on burung cos normal borrowing

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(v) Interest is based on Burung Co's normal borrowing rate of 150 basis points over the 10-year government yield rate. (vi) At the beginning of each year, Burung Co will need to provide working capital of 20% of the anticipated sales revenue for the year . Any remaining working capital will be released at the end of the project. (vii) Working capital and depreciation have not been taken into account in the net present value calculation above, since depreciation is not a cash flow and all the working capital is returned at the end of the project. Faoilean Co (6/14) 45mins
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Copyright © ACCAspace.com ACCAspace 中国 ACCA 特许公认会计师教育平台 7 It is anticipated that the project will be financed entirely by deb t, 60% of which will be obtained from a subsidised loan scheme run by the Government, which lends money at a rate of 100 basis points below the 10- year government debt yield rate of 2.5% . Issue costs related to raising the finance are 2% of the gross finance required . The remaining 40% will be funded from Burung Co's normal borrowing sources . It can be assumed that the debt capacity available to Burung Co is equal to the actual amount of debt finance raised for the project. Burung Co has identified a company, Lintu Co, which operates in the same line of business as that of the project it is considering. Lintu Co is financed by 40 million shares trading at $3.20 each and $34 million debt trading at $94 per $100 . Lintu Co's equity beta is estimated a t 1.5. The current yield on government treasury bills is 2% and it is estimated that the market risk Faoilean Co (6/14) 45mins
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