Q$4.$ Udhaar Enterprise Limited has borrowed from the market by issue of debentures with the coupon rate of $10\mathrm{.}5\%.$ It is profitable enterprise paying $36\%$ tax.

$($i$)$ What is the cost of debt if it sells at

$>$ Par; at $5\%$ discount; and at $5\%$ premium

$($ii$)$ If instead of debt the firm had issue preference share with the promised dividend of $10\mathrm{.}5\%$ what would be the cost of preference share if it sells at

$>$ Par; at $5\%$ discount; and at $5\%$ premium

Why do you think that there is a difference in the cost of debt and preference capital despite identical features and cash flows.