Tax-rate is relevant and important for calculation of specific cost of capital of ____________.

Equity Share Capital

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Preference Share Capital

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Debentures

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Both A and B

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Solution

The correct option is B Debentures
In case of debenture, interest payable is the cost of capital. Interest on debenture is tax deducible and charged to profit & loss account as an expense. It reduces the tax liability of the business.
Tax rate is relevant and important for calculation of cost of capital for debenture.

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