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A company raises ₹1,00,000 by issuing 1000, 10% debentures of ₹100 each at a 2% discount, redeemable after 10 years. If the corporate tax rate is 40%,
Question



A company raises ₹1,00,000 by issuing 1000, 10% debentures of ₹100 each at a 2% discount, redeemable after 10 years. If the corporate tax rate is 40%, what is the cost of capital?

A.

6.82%

B.

5.98%

C.

6.18%

D.

5.5%

Correct option is C

The cost of debt capital (Kd) is calculated using:



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