AB Ltd. issued 10,000, 12% convertible debentures of `100 each with a maturity period of 5 years.

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● AB Ltd. issued 10,000, 12% convertible debentures of `100 each with a maturity period of 5 years.

At maturity the debenture holders will have the option to convert the debentures into equity shares of the company in the ratio of 1:10 (10 Shares for each debenture). The current market price of the equity shares is `14 each and historically the growth rate of the shares are 5% per annum.

Compute the cost of debentures assuming 35% tax rate.

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Financial Management

ISBN: 9789352605606

1st Edition

Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana

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