Question

debenturo g
itd imes 5,000, 8%
A B C
Rs 100 each at a
10% and redeemable
daro discount of
issues
10 years. The expenses of
anted to Rs 10, 0oo.
o. Find
out the
cost
1
debt capital
of​

Answer 1

Answer:

Solution

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Correct option is A)

Here, the discount is payable on the redeemable debentures i.e. Rs 1,00,000.

The discount of 10% on these debentures means Rs 10,000 per year. The expenses on issue amounted to Rs. 20,000 and 10% discount per year means that 10% of 20,000 i.e Rs 2,000 will be written off each year which means the expense will be Rs 10,000, then Rs 8,000, Rs 6,000, Rs 4000, Rs 2000.