Page 55 - 5.2 i. Manac Finance ITC Summarised Notes
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COST OF CAPITAL
Debt (kd)
Example 1:
Company B has 10 000 R100 debentures in issue. Interest at 12% is paid
annually. The debentures are non redeemable and are currently trading at
R96 each. The current tax rate is 28%. Calculate the cost of debt.
kd (after tax) = 100 x 12% x 72%
96
= 9%
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