1. A company issues a new 10 percent debentures of Rs 1,000 face value to be redeemed...
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1. A company issues a new 10 percent debentures of Rs 1,000 face value to be redeemed after 10 years The debenture is expected to be sold at a 5 percent discount. It will also involve floatation costs of 5 percent of face value. The company’s tax rate is 35 percent. What would the cost of debt be? Illustrate the computations using (i) trial and error approach and (ii) shortcut method.
2. A company issues 11 percent debentures of Rs 100 for an amount aggregating Rs 1,00,000 at 10 percent premium, redeemable at par after five years. The company’s tax rate is 35 percent. Determine the cost of debt, using the shortcut method.
Related Book For
Cost Benefit Analysis Concepts and Practice
ISBN: 978-0137002696
4th edition
Authors: Anthony Boardman, David Greenberg, Aidan Vining, David Weimer
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