On Jan 1 20X1 Q Ltd had issued 500 debentures at a face amount of $5 000 each, 10% interest payable annually in arrears.There was a premium on issue of $750 per debenture.These debentures were publicly tradable after initial issue.The terms of issue state that the debentures can be bought back directly from the holder upon payment by Q Ltd of a premium of $400 per debenture and accrued interest.On July 1 20X6 Q Ltd bought back 100 of the debentures via the open market (Australian Securities Exchange) where the market price was steady at $4 300.
-What would be the total cash outflow incurred during this buyback by Q Ltd?

Question

Quizplus · Accepted Answer

The total cash outflow is calculated by multiplying the market price per debenture ($4,300) by the number of debentures bought back (100), resulting in $430,000.

On Jan 1 20X1 Q Ltd Had Issued 500 Debentures