Calculate the cost of debt if the company issues Rs.20000, 15% debentures at a discount of 5%Options :7.27%15.78%9.52%11.1%

To calculate the cost of debt, we need to know the interest expense and the net proceeds from the issue of the debentures.

1. Calculate the interest expense: The interest expense is the face value of the debentures multiplied by the coupon rate. In this case, it is Rs. 20,000 * 15% = Rs. 3,000.

2. Calculate the net proceeds: The net proceeds are the face value of the debentures minus the discount. In this case, it is Rs. 20,000 - (5% of Rs. 20,000) = Rs. 19,000.

3. Calculate the cost of debt: The cost of debt is the interest expense divided by the net proceeds, multiplied by 100 to get a percentage. In this case, it is (Rs. 3,000 / Rs. 19,000) * 100 = 15.78%.

So, the cost of debt is 15.78%.

To calculate the cost of debt, we need to know the interest expense and the net proceeds from the issue of the debentures.

1. First, calculate the interest expense. This is the face value of the debentures multiplied by the coupon rate. In this case, Rs. 20,000 * 15% = Rs. 3,000.

2. Next, calculate the net proceeds from the issue of the debentures. This is the face value of the debentures minus the discount. In this case, Rs. 20,000 - (5% of Rs. 20,000) = Rs. 19,000.

3. Finally, calculate the cost of debt. This is the interest expense divided by the net proceeds from the issue of the debentures, multiplied by 100 to get a percentage. In this case, (Rs. 3,000 / Rs. 19,000) * 100 = 15.78%.

So, the cost of debt if the company issues Rs. 20,000, 15% debentures at a discount of 5% is 15.78%.