A company issues 10 % debenture at face value of Rs 100, which will be redeemed at Rs 110 after 10 years .Calculate cost of capital.Options :7.27%8%10.47%7.8%
Question
Solution 1
To calculate the cost of capital, we need to use the formula for the cost of debt, which is:
Cost of Debt = (Interest Expense + (Redemption Value - Issue Price) / Life of the Debenture) / (Redemption Value + Issue Price) / 2
Here, the Interest Expense is 10% of Rs 100, which is Rs 10. The Redempti Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
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