CIMA F2 Advanced Financial Reporting F2 Question # 42 Topic 5 Discussion

CIMA F2 Advanced Financial Reporting F2 Question # 42 Topic 5 Discussion

F2 Exam Topic 5 Question 42 Discussion:
Question #: 42
Topic #: 5

UV has raised $100,000 through the issue of two irredeemable financial instruments:

•  6% debentures with a current market value of $101.50 per $100 nominal value; and

•  8% preference shares with a current share price of $2.20 each.

The corporate income tax rate is 20% 

What is the post tax cost of debt for each of these instruments?


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