Read the following case study and answer question.
Rancho Ltd. was running successfully since last 8 years. Post covid there were some financial problems faced by firm, like many industries were facing. Due to their past reputation they could manage the permission from SEBI for issuing of shares on 1 Aug, 2022. They also decided to issue 12% Debentures of ₹100 each at 10% Discount and were to be redeemed at 25% premium in such a way that they could arrange fund of ₹45,00,000. At the time of issue of Debenture they also issued equity Share of ₹30,00,000 at 20% premium.
What will be the amount of premium on Redemption of Debentures?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹12,50,000
The premium on redemption is a percentage of the face value of the debentures, payable when they are repaid.
Face value = 50,000 × ₹100 = ₹50,00,000
Premium on redemption = ₹50,00,000 × 25% = ₹12,50,000
Taking 25% of the amount raised (₹45,00,000) gives ₹11,25,000, which is a common slip.