A company issues new debentures of Rs.2 million, at par; the net proceeds bein

A company issues new debentures of Rs.2 million, at par;
the net proceeds being Rs.1.8 million. It has a 13.5 per
cent rate of interest and 7 years maturity. The company’s
tax rate is 52 per cent. What is the cost of debenture
issue? What will be the cost in 4 years if the market value
of debentures at that time is Rs.2.2 million?

Question Posted / binod prasad bajgai

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