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M ltd co issues loan notes with a par value of 100$million at price of 90$. per 100$.
the annual coupon rate interest 10%. the loan caital is redeemable in two years time asits nominal value.
tax at30%what is after tax cost of debt?
ans is 13%
but i did nt understand how they get 13%
sir we can us this formula right in cost of debt calculation?
kd(-t)/mv ?can you plz help me out how to solve this qstn
For $100 nominal, the flows are:
0 Market value. (90)
1 -2 Interest (after tax). 7 p.a.
3. Redemption 100The cost of debt is the IRR of these flows as is all explained in my lectures on the cost of capital.
sir when i do in excel diff method to get irr i get 11%
year cf
0 -90
1 7
2 7
3 (100+7)than i use =irr(sum) of the above i get 11% but the ans is 13% in exam this methos is easy?
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