Question

Calculate the value of Equity Share by yield method : 1,000, 14% Preference Shares of Rs. 100 each. 20,000 Equity Shares of Rs. 10 each. Annual profit Rs. 1,90,000, Rs. 2,10,000, Rs. 2,05,000 and Rs. 2,15,000 respectively in 2010-11, 2011-12, 2012-13 and 2013-14. Tax Rate 25% General Reserve Transfer 20% of Profits normal rate 20%​

Answer 1

Answer:

Example:A company issued 10,000, 10% preference share of Rs. 10 each, Cost of issue is Rs. 2 per share.Calculate cost of capital, of these shares are not issued (a) at par , (b) at 10% premium, and (c)at 5% discount.Solutions : Cost of preferencecapital, (Kp) = D/NPa)When issued at par:Rs. 10,00010,000Kp=x100 =x100 =12.5%1,00,000-20,00080,000[ Cost of issued = 10,000xRs. 2= Rs. 20,000

This is not the correct answer but you relate them.