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.
Determine the number of Debentures to be issued.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 50,000 Debentures
The company wants to collect ₹45,00,000 in cash, and each debenture brings in only its issue price, which is face value less the discount.
Issue price = ₹100 − 10% of ₹100 = ₹90
Number of debentures = ₹45,00,000 ÷ ₹90 = 50,000
Dividing by the face value of ₹100 gives 45,000, but that would raise only ₹40,50,000 at a 10% discount.