A company raised ₹4,90,000 by issuing 5,000 10% debentures of ₹100 each with 8-year maturity at 2% discount. It also paid commission of 3% of the face value to brokers. If the company falls in 30% tax bracket, the approx

CS Executive · Financial and Strategic Management · PYQS · June 2023
A company raised ₹4,90,000 by issuing 5,000 10% debentures of ₹100 each with 8-year maturity at 2% discount. It also paid commission of 3% of the face value to brokers. If the company falls in 30% tax bracket, the approx. effective cost of the debt is:
(A) 10.90%
(B) 7.37%
(C) 7.63%
(D) 7.25%

Answer & Explanation:

Correct Answer: Option (C)

Official answer key: (C).

Topics: Financial Management

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