Question 8 On 1 April, 2008 Sigma Ltd. issued 6% Convertible debentures of face value...
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Question 8 On 1 April, 2008 Sigma Ltd. issued 6% Convertible debentures of face value of 100 per debenture at par. The debentures are redeemable at a premium of 10% on 31-03-2012 or these may be converted into ordinary shares at the option of the holder, the interest rate for equivalent debentures without conversion nights would have been 10%. Being a compound financial instrument, you are required to separate equity and debt portions as on 01-04-2008 Equity portion is 1.85,400. Find out the debt portion (Debenture amount). The present value of 31 receivable at the end of each year based on discount rates of 6% and 10% can be taken as: End of year 6% 10% 1 0.94 0.91 2 0.89 0.83 3 0.84 0.75 4 0.79 0.68 AN
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