Question: Narottam Ltd has 11% debentures (Rs 1000/- face value) worth Rs 800 Cr outstanding. These debentures are due to be redeemed in another 4 years

Narottam Ltd has 11% debentures (Rs 1000/- face value) worth Rs 800 Cr outstanding. These debentures are due to be redeemed in another 4 years and are trading at Rs 970/- currently. The firm also has issued 11.2 crore shares (FV Rs 10/- each) having market capitalisation of Rs 1025 crores. Assuming that investors expect a return of 18% on firms of similar risk profile, calculate the overall cost of capital for Narottam Ltd. Consider corporate tax rate at 25% and risk-free rate of 6%.

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