Calculate the cost of debt if the company issues Rs.100000, 10% debentures at a discount of 10%.Options :7.27%8%9.52%11.1%
Question
Solution 1
To calculate the cost of debt, we need to understand the formula first. The cost of debt is calculated as:
Cost of Debt = (Interest Expense / Net Proceeds) * 100
Here, the interest expense is the annual interest on the debentures, which is 10% of Rs. 100000 = Rs. 10000.
The net proceeds are the a Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
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