Question

y Ltd issues Rs.50000 8%debentures at a premium of 10% the Tax rate Application to the company is 60% compute cost of debt capital solve the problem ​

Answer 1

Answer:

2.91

Explanation:

Kd= I (1-t) / NP

here , I =4000 , NP = 50000+5000= 55000 , t=0.6

putting into the formula

kd = 4000 (1-0.6)/ 55000 =0.02909 or 2.91

Answer 2

Formula

Kd = I(1-t)/NP

Steps

t = 0.6

I= 50,000×8%

= 4000

NP = 50000+5000

= 55,000

Kd = 4000(1-0.6)/55000

=0.029

Kd= 0.029