Correct Answer - Option 4 : 8.2%

__Concept:__

cost per debenture = __\(\left( {\frac{{interest\left( {1 + t} \right) + \frac{{RV - NP}}{N}}}{{\frac{{PV + NP}}{2}}}} \right)\)__

where RV = Reedemable value, NP = Net proceeds from issue

__Calculation:__

**Given:**

i = 12 % = 0.12, t = 40 % = 0.4, NP = 95

**∴RV = 100 (1 + 0.005) = 105**

Thus, substituting

cost per debenture = \(\left( {\frac{{12 \times \left( {1 - 0.4} \right) + \frac{{105 - 95}}{{10}}}}{{\left( {\frac{{105 + 95}}{2}} \right)}}} \right) \times 100\)

∴ cost per debenture\( = \left( {\frac{{7.5 + 1}}{{\frac{{200}}{2}}}} \right) = \left( {\frac{{8.2}}{{100}}} \right) \times 100 \)

**∴ cost per debenture = 8.2 %**