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Bond Factory Ltd issued R200, 000, 9% debentures at a premium of 10%. The costs of floatation are 2%. The debentures are redeemable in 10
Bond Factory Ltd issued R200, 000, 9% debentures at a premium of 10%. The costs of floatation are 2%. The debentures are redeemable in 10 years.
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To compute the beforetax cost of debt we need to consider the coupon rate premium and flotation costs The beforetax cost of debt is the yield or return that Bond Factory Ltd will pay to debenture holders before considering taxes Given information Face value of debentures R R200000 Coupon rate 9 Premium 10 Flotation costs 2 Redemption period 10 years Step 1 Calculate the premium amount Premium Face value Premium rate Premium R200000 10 R20000 Step 2 Calculate the flotation costs Flotation costs Face value Flotation cost ...
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Financial Reporting and Analysis
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
6th edition
9780077632182, 78025672, 77632184, 978-0078025679
