QUERY OF MAFA - COST OF CAPITAL

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Jaydip H. Trivedi (Querist)
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19 March 2009 I've doubt in one example question form COST OF CAPITAL, pls help me to solve. The Q is: X Ltd. issued Debentures having face value Rs.1000, rate of interest @ 20%. Issue is before 6 years. Investor's current required rate of return has increased to 25%. Calculate return to investors, if current market price is Rs.750.

The solution is as :-> Rs.1000*20%/750*100 = 26.67%.

My question is, if the current market value is less than the face value, then how could the return computed is more than the required rate of return?

Please help me on this topic.

Thanks.

Jaydip Trivedi.

Taranjit Singh

Taranjit Singh (Expert)
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27 September 2009 If this query is still pending then please post it again by updating......Good wishes.....or you can also send me a PM.

Taranjit Singh

Taranjit Singh (Expert)
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27 September 2009 If this query is still pending then please post it again by updating......Good wishes.....or you can also send me a PM.

Jaydip H. Trivedi

Jaydip H. Trivedi (Querist)
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28 November 2009 Query is solved. Thanks.

Jaydip H. Trivedi

Jaydip H. Trivedi (Querist)
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12 December 2009 Thanks.

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