Hi,
I have tried following way... I am not sure if it is correct... somebody please sugest-----
(a)
I(1âT) + {(FâP)/n}
Kd =---------------------------------
(F+P)/2
Where Kd is post tax cost of debenture capital,
I is the annual interest payment per unit of debenture,
T is the corporate tax rate,
F is the redemption price per debenture,
P is the net amount realized per debenture,
n is maturity period
13.5(1â0.52) + (2â1.8)/7 13.5*.48+.2/7 6.51
------------------------------------- = -------------------------- = ----------- = 3.43
(2+1.8)/2 1.9 1.9
(b) 13.5(1-.52)+(2-2.2)/4 13.5*.48-.2/4
---------------------------= ------------------- =6.43/.21 =3.06
(2+2.2)/2 2.1 |