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Find out the cost of capital of debentures

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Question - ABC Ltd. issues 12.5% debentures of face value of 100 each, redeemable at the end of 7 years. The debentures are issued at a discount of 5% and the floatation cost is estimated to be 1%. Find out the cost of capital of debentures given that the firm has 40% tax rate.

Reference no: EM132944114

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