Question

A company issues 10,000 10% Preference Shares of Rs, 100 each. Cost of issue is Rs, 2 per share. Calculate
cost of preference capital if these shares are issued (a) at par, (b) at a premium of 10%, and (c) at a discount
of 5%
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Answer 1

Answer:

A. 20,000

B. 22,000

C. 19,000

Explanation:

Given: 10000 shares at Rs. 2 per share

A. 10000×2 = 20000

B. 2×10% = 0.2

2+ 0.2=2.2

2.2×10000=22000

C. 2×5%=0.1

2-0.1=1.9

1.9×10000=19000