📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!


    Question

    The cost of 'Redeemable Preference Share Capital' for a

    company is calculated by considering:
    A The dividend rate and the face value of the shares. Correct Answer Incorrect Answer
    B The dividend rate, the net proceeds from the issue, and the redemption value. Correct Answer Incorrect Answer
    C Only the market price of the shares. Correct Answer Incorrect Answer
    D The rate of inflation. Correct Answer Incorrect Answer

    Solution

    The cost of redeemable preference share capital is the discount rate that equates the present value of the future streams of dividends and the redemption value with the net proceeds from the share issue. It is similar to calculating the yield to maturity (YTM) for a bond.

    Practice Next
    ask-question