A Company issues - 10,00,000, 12% debentures of 100 each. The debentures are redeemable after the expiry of fixed period of 7 years. The Company is…

CA Intermediate · Financial Management and Strategic Management · MTP · May 2025
A Company issues - 10,00,000, 12% debentures of 100 each. The debentures are redeemable after the expiry of fixed period of 7 years. The Company is in 35% tax bracket. Calculate the cost of debt after tax, if debentures are issued at 10% Premium.
(A) 9.00%
(B) 7.80%
(C) 9.71%
(D) 6.07%

Suggested Answer and Working Notes:

Correct Answer: Option (D)

6.07%

Topics: Part-A: Financial Management

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