Neco 2023 Commerce Question 9
Practice objective / multiple choice question 9 from the 2023 Neco Commerce examination.
A company needs \(\text{₦}5,000,000\) for expansion. It can either (a) obtain a bank loan at 8\% per annum payable annually, with a loan‑arrangement fee of 1\% of the loan amount, or (b) issue 5‑year debentures at 10\% per annum payable annually, with an underwriting cost of 2\% of the issue amount. The corporate tax rate is 30\%. Assuming the company can meet the interest payments, compute the after‑tax cost of each financing option as a percentage of the net amount actually received. Express each cost to two decimal places and state which option is cheaper.
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About This Question
This is Neco 2023 Commerce Question 9. It is one of the objective questions from the 2023 Neco Commerce examination.
Difficulty level: Medium .
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