Question

k ltd issued 50000, 10% debentures of Rs 100 each redeemable in 10 years time at 10% premium. The cost of issue was 2.5%. The company tax rate is 2.5%. Determine the cost of debt before tax and after tax. If it is issued (i) at par (ii) at premium of 5% (iii) at discount of 10%​

Answer 1

COST OF CAPITAL

 Discuss the need and sources of finance to a business entity.

 Discuss the meaning of cost of capital for raising capital from

different sources of finance.

 Measure cost of individual components of capital

 Calculate weighted cost of capital and marginal cost of

capital, Effective Interest rate.

Cost of

Capital

Cost of

Debt

Cost of

Preference

Share

Cost of

Equity

Cost of

Retained

Earning

Combination of

Cost and Weight

of each sources of

Capital

Weighted

Average Cost of

Capital (WACC)

I hope you understand and it will be help you ❤️✨

Answer 2

Answer:

(I) at par is correct answer