What is cost of debenture?

The cost of debenture refers to the effective interest rate or yield that a company pays to its debenture holders for the borrowed funds. It includes the interest payments made to investors and any issuance costs, expressed as a percentage of the total amount raised through the debenture. This cost is critical for companies as it impacts their overall financing costs and financial performance. Understanding this cost helps in evaluating the attractiveness of using debentures for funding compared to other financing options.