Yunex Ltd has borrowed from the market by issues of debentures with the coupon rate of 10.5%.
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Question:
Yunex Ltd has borrowed from the market by issues of debentures with the coupon rate of 10.5%. It is a profitable enterprise paying 36% tax.
- What is the cost of debt if it sells at 5% premium (c) at 5% discount to the face value?
- If instead of debt , the firm has issued a preference shares with the promised dividend of 10.5%, what would be the cost of preference shares when it sells (a)at par (b) at 5% premium (c) at 5% discount to the face value?
- Why do you think that there is a difference in the cost of debt and preference capital despite identical and cash flows?
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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