Y Ltd, issued 2,000 10% preference shares of Rs 100 each
at Rs 95 each. The company proposes to redeem the preference
shares at the end of 10 years. Calculate the cost of preference
shares.
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10.77 is the answer as reedemable value is equal to 2000*100*10/100 which is equal to 200000 prefrence dividend is equal to 2000*100 which is 20000
net proceeds is equal to 95*2000 which is 190000 and the cost of prefrence share is equal to pd +{(rv - np)/n}/[(rv+np)/2] by putting values we get the answer. n is given i.e 10
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