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Sir in case of irredeemable debt if question says to calculate cost of debt, then we are required to calculate before tax cost of debt OR after tax cost of debt?
Sir If question says that A ltd has 3% debentures at a par value of $100. Debt can be redeemed at Par after 4 years or converted after 4 years into 10 shares at $8 per share. Tax rate is 20%, cost of debt is 15%. Calculate market value of debenture?
Here cost of debt of 15% is before tax cost of debt OR after tax cost of debt?Sir If question says that A ltd has 3% debentures at a par value of $100. Debt can be redeemed at Par after 4 years or converted after 4 years into 10 shares at $8 per share. Tax rate is 20%,debt holders required return is 15%. Calculate market value of debenture?
Here debt holders required return of 15% is before tax cost of debt OR after tax cost of debt?Assuming you have copied the questions word for word, then for the first one the 15% is after tax and for the second one the 15% is before tax.
I don’t know why you are asking me, since it must be clear from the answers what has been done, and you say that you have watched my lectures.
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