Question

What is the difference between cost of equity ,cost of debt,cost of preference...

Answer 1

Answer:

Cost of Equity is the rate of return expected by shareholders for their investment. Cost of Debt is the rate of return expected by bondholders for their investment. Cost of Equity does not pay interest, thus it is not tax deductible

Explanation:

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Answer 2

Answer:

1. Cost of Preference Share Capital: An amount paid by company as dividend to preference shareholder is known as Cost of Preference Share Capital. Preference share is a small unit of a company's capital which bears fixed rate of dividend and holder of it gets dividend when company earn profit.
2. To calculate the cost of debt, a company must determine the total amount of interest it is paying on each of its debts for the year. Then it divides this number by the total of all of its debt. The result is the cost of debt. The cost of debt formula is the effective interest rate multiplied by (1 - tax rate).
3. The cost of equity is the return a company requires to decide if an investment meets capital return requirements. ... A firm's cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership

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