Question

cnouibwqyc who wants do show (a) 1,000 equity shares of Rs.100 each at Rs.60 per share as Rs.50 per share paid (b) 1,000 preference shares of Rs.100 each @ discount of 2% as...

Answer 1

A company plans to issue 1000 new shares of Rs. 100 each at par. The floatation costs are expected to be 5% of the share price. The company pays a dividend of Rs. 10 per share initially and the growth in dividends is expected to be 5%. Compute the cost of new issue of equity shares.

(b) If the current market price of an equity share is Rs. 150, calculate the cost of existing equity share capital.