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Abascus limited has hired you to help the company make a decision on financing a proposed project. You have been provided with the following information:
Abascus limited has hired you to help the company make a decision on financing a proposed project. You have been provided with the following information:
i. The company issued debentures at the face value of Kshs. 100 per debenture.
ii. The coupon rate provided is 10 percent
iii. Maturity period is for 5 years
iv. Market price is Kshs. 90
Assuming corporate tax at 20 percent calculate the after-tax cost of debt for Abascus and advice the company. (10 marks)
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