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. Dividend payable is not a tax deductible amount. So, there
is no tax adjustments required for comparing with cost of debt.
Formula for Cost of Preference Share:
Irredeemable Preference Share
|
Redeemable Preference Share
|
Kp = Dp/NP
|
Kp = Dp+((RV-NP)/n )/ (RV+NP)/2
|
Where,
Kp = Cost of Preference Share
Dp = Dividend on preference share
NP = Net proceeds from issue of preference share
(Issue price – Flotation cost)
RV = Redemption Value
N = Period of preference share
Example: A
company issues 20,000 irredeemable preference share at 8% whose face value is
Rs.50 each at 4% discount. Find out the Cost of Preference Share Capital.
Solution: Dividend
on Preference share (Dp) = 50*8/100 = 4
Discount = 50*4/100 = 2
Net Proceeds (NP) = 50-2 = 48
Kp = Dp/NP
=4/48
= 8.33%
Example: Find out the cost of 10, 500 irredeemable preference
shares if issues at 2% premium of Rs.60 each. The dividend paid by the company
is Rs. 6 each. The flotation cost is Rs. 8 per share.
Solution: Premium amount = 60*0.02 = 1.2
Issue price = 60 + 1.2 = 61.2
Net proceeds
= 61.2 - 8= 53.2
Kp =
Dp/NP
= 6 / 53.2
= 11.27%
Example: A
preference share issues at 12% worth Rs 60,000 at 5% discount and after 6 years
it redeem at 10% premium. The flotation cost is 5% and tax rate is 20%. Find
out the cost of preference share capital.
Solution:
Dividend on preference share (Dp) =
60,000*12/100 = Rs.7200
Discount = 60,000*5/100 = Rs.3000
Flotation Cost = 60,000*5/100 = Rs.3000
Net Proceeds (NP) = Rs. (60,000-3000-3000) = Rs.
54,000
Premium amount = 60,000*10/100 =Rs. 6000
Redemption Value = Rs. (60,000+6000) = Rs. 66,000
Kp = Dp+ ((RV-NP)/n)/
(RV+NP)/2
= 7200+ ((66,000-54,000)/6) / (66,000+54,000)/2
= 9200/60,000
= 15.33%
Example:
Company ABC a small company issued 50, 000 shares of 10 each and pays Rs.8 per
shares as dividend. Further issue 10, 000 debentures of Rs. 100 each and the
interest pays by the company is 8%. Company wants to expand its business by
opening a new branch in different cities. It wants to finance its expansion
project through 6% preference shares. Find out:
·
Cost of
preference share if issues 100 of Rs. 80 each at 3% discount and redeem at 5%
premium after 8 years.
·
Which
one is good for the company redeemable preference share or irredeemable
preference share?
·
Flotation
cost Rs. 10 each.
Solution:
Discount= 80*0.03 = 2.4
Issue price= 80-2.4 = 77.6
Net proceeds = 77.6 – 10 = 67.6
Dividend = 0.06*80 = 4.8
Premium amount = 80*0.05 = 4
Redemption value = 80 + 4 = 84
Irredeemable Preference share:
Kp = Dp/NP
= 4.8 / 67.6
= 7.10%
Redeemable Preference share:
Net proceeds = 80 – 2.4 - 10 = 67.6
Kp = Dp+ ((RV-NP)/n)/
(RV+NP)/2
= 4.8 + ((84-67.6)/8)/ (84+67.6)/2
= (4.8 + 2.05) / 75.8)
= 6.85/75.8
= 9.03%
The cost of redeemable preference shares is more than irredeemable preference share. So, the irredeemable preference
share is beneficial for the Company ABC.
Nice Article. Thank you for sharing the informative article with us.
ReplyDeleteThis post is helpful to many people. stockinvestor.in is a stock related website which provides all stocks related information like new stocks and shares available in the stock market.
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What would be the formula if dividend tax is given
ReplyDelete*Not tax , dividend tax
Cost of irredeemable preference share = Dp (1+dividend tax)/NP
DeleteCost of redeemable preference share = Dp (1+ dividend tax) + ((RV-NP/n)/((RV+NP)/2)
Don't need to multiply it by 100 in both the formulas
DeleteMultiply the answer to convert it into percentage.
DeleteThanks a lot Jyoti Mam for providing such beautiful analysis, do u have a youtube channel for account classes, plz share the link, ur absolutely amazing, great work
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Sensitive Index
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2. Company issued preference share of Rs 20Lakhs. Face value of Rs. 100
ReplyDeleteand is issued at 8% premium. Dividend is 9% and redemption will be after 8 years at par. What is the cost of preferences shares?
Kp = Dp + ((RV-NP)/n))/(RV+NP)/2
Delete= 180000+((2000000-2160000)/8))/(2000000+2160000)/2
= 180000+(-160000/8)/(4160000/2)
= 160000/2080000
= 7.69%
Issue price can be Market price as well??
ReplyDeleteNo, Market price is the share price of a company which is determined by the forces of demand and supply of share in market and issue price is the price offered to investors to purchase the share.
DeleteWhat would be the cost of the preference shares if you have the market price of the shares, growth rate, bond price and the set target structure.
ReplyDeleteCost of preference share = (dividend/ market price)*100
DeleteHey, thanks for the information. your posts are informative and useful. I am regularly following your posts.
ReplyDeleteHCL Technologies, Kotak Institutional
Very informative post thanks
ReplyDeleteKey Assumptions of Modern Portfolio Theory
Why you have deducted 2.4 from 80rs twice? And why floatation cost is not deducted from np in irredeemable pref shares.
ReplyDeleteBy mistake i subtracted twice but thanks for correction
DeleteHey...Great information thanks for sharing such a valuable information
ReplyDeleteYes Asset Management
Investor
YES Bank
1. Manager of KAKAKUONA LIMITED capital employed of 100 million where value of market 150 million has the following:-
ReplyDeleteBOOK VALUE
capital share 30,000,000,
Retained earning 45,000,000,
Preference share 7,000,000,
Debentures 18,000,000.
Total 100,000,000.
MARKET VALUE
Capital share 130,000,000,
Retained earning -?
Preference share 6,000,000,
Debentures 14,000,000
Total 150,000,000.
The firm paid dividend of Tsh 20,000 last year which has been growth 8% also paid income tax 5%. The following information is available in respect of value source capital.
Equity share, fresh share can issued at price of 220,000 with floatation cost 4%.
Debenture, fresh share can issued with the following features;
*Coupon rate 12% annually
*Face value Tsh 100,000, redemption value Tsh 100,000
*Coupon payment Tsh 12,000, time to maturity 15 years issued price Tsh 95,000 with floatation cost of 1.5%.
New preference share can be in the following;
Dividend is 15%
Floatation cost is 2%
Face value 100,000
Issued price 110,000
Required
Calculate WACC Base on the following
1. Book value
2. Market value
cost of equity = [20,000/(2,20,000-8,800)] + 0.08 = [20,000/2,11,200] +0.08 = 17.46%
DeleteCost of debt = 12,000(1-0.05)+ (1,00,000 - 93,575)/15)/(1,00,000 + 93,575)/2
= 11,400+428.3/96,787.5 = 11,823.3/96,787.5 = 12.22%
preference share dividend = 1,10,000*0.15=16,500
net proceeds = 1,10,000-1,10,000*0.02 = 1,07,800
cost of preference share = 16,500/1,07,800 =15.30%
cost of retained earnings = (20,000/2,20,000) +0.08 = 17.09%
book value:
equity 30 * 0.174 = 5.22
retained earnings 45 * 0.17 = 7.65
debenture 18 * 0.122 = 2.196
preference share 7 * 0.153 = 1.071
Total 100 16.137
WACC on book value = 16.137/100 = 0.16*100 =16.13%
market value:
equity 52 * 0.174 = 9.048
retained earnings 78 * 0.17 = 13.26
debenture 14 * 0.122 = 1.708
preference share 6 * 0.153 = 0.918
Total 150 24.934
WACC on market value = 24.934/150 = 0.1662 =16.62%
market value of equity = (130/30+45)*30 =52
market value of retained earnings = (130/30+45)*45 =78
ABC company has 9% redeemable preference shares. The redeemable are trading at R1.08 and have a par value of R1. Shares redeemed in 5 years.
ReplyDeleteCan you use the annuity principle?
rate of dividend yield is not given
Deletewith the help of dividend yield rate this question solve by using formula of present value of annuity. And adding the result with (1.08/r)
= (p(1-(1+r)^-n)/r ) + (1.08/r)
calculate the cost of redeemable preference shares if a company issues 10000 8% preference shares, redeemable at par after 10 years . floatation cost is 4% . kp to be calculated if the issue is at par , at premium of 5% , and at a discount of 10%?
ReplyDeleteLet's assume Rs.100 per share
DeleteDividend = 10,00,000*0.08 = Rs.80,000
NP at par = Rs. (10,00,000-40,000) = Rs. 9,60,000
NP at premium = Rs. (10,00,000+50,000-40,000) = Rs. 10,10,000
NP at discount = Rs. (10,00,000 -100,000-40,000) -Rs. 8,60,000
Kp at par = (80,000+(10,00,000-9,60,000/10))/((10,00,000+9,60,000)/2)
= 84,000/980000 = 8.57%
Kp at premium = (80,000+(10,50,000-10,10,000/10))/((10,50,000+10,10,000)/2)
= 84000/10,30,000 =8.15%
Kp at discount = (80,000+(9,00,000-8,60,000/10))/((9,00,000+8,60,000)/2)
= 84,000/8,80,000 = 9.54%
Why you've take redemption value(rv) at premium in 2nd case and at discount in 3rd.
DeleteWhen que. Ask kp at different issue price(only)!
Let's assume Rs.100 per share
DeleteDividend = 10,00,000*0.08 = Rs.80,000
NP at par = Rs. (10,00,000-40,000) = Rs. 9,60,000
NP at premium = Rs. (10,00,000+50,000-40,000) = Rs. 10,10,000
NP at discount = Rs. (10,00,000 -100,000-40,000) -Rs. 8,60,000
Kp at par = (80,000+(10,00,000-9,60,000/10))/((10,00,000+9,60,000)/2)
= 84,000/980000 = 8.57%
Kp at premium = (80,000+(10,00,000-10,10,000/10))/((10,00,000+10,10,000)/2)
= 79000/10,05,000 =7.86%
Kp at discount = (80,000+(10,00,000-8,60,000/10))/((10,00,000+8,60,000)/2)
= 94,000/9,30,000 = 10.10%
Thank you so much for asking i have corrected the mistake.
👍
Deletecompany issues 12% preference share of the face value of rs 100 each floatation cost are estimated at 4% of the expected sale price what will be the cost of preference share capital if preference shares are issued at par at 10% premium and at 5% discount
DeleteJyoti Yadav...I need you help. I'm submitting in few and I'm stuck. I've beeeeeen researching and that is how I ended up here. I have 3 questions I need help with. Can you assist?
ReplyDeleteHi Mafaka, yes i can assist you and you can ask questions and i will try my best to get solve as soon as possible.
DeleteOffshore International is a multi-national conglomerate.
DeleteOffshore International is in the process of calculating their WACC rate for the 2020
financial year and has complied the following information:
• Ordinary Shares
Dividend declared for 2020 R250 000.
The dividend yield of Offshore International is estimated to be 11%.
There are 100 000 ordinary shares in issue.
• Preference Shares
These are 10% preference shares convertible into ordinary shares
in 2022. The offer for conversion is one ordinary share for every
four preference shares held.
It is estimated that these preference shares have a market rate of
18%.
The book value of the preference shares is R4million and the price
per preference share is R5.
• Debentures
These debentures are non-convertible and non-redeemable.
The debentures current yield to maturity is 20%.
The market value of the debentures is R14million.
Additional Information:
• Extract from the statement of comprehensive income:
Profit after tax
2019 - R650 000
2018 - R601 800
2017 - R557 200
• The tax rate is 28%.
Calculate the Weighted Average Cost of Capital (WACC) of
Offshore International.
Pepko is a retailer of various fast-moving consumer
Deletegoods (FMCG’s).
Due to the COVID-19 pandemic the entity has experienced reduced
operating margins and liquidity concerns. As part of their process to
manage liquidity concerns, they have considered factoring their accounts
receivable (debtors’ book). Below is an extract from the notes to Pepkor's
financial statements as at 31 July 2020:
Trade Debtors 2 000 000
Provision for Doubtful Debts (150 000)
Prepayments 200 000
Trade and Other Receivables 2 050 000
Pepkor has approached BNF Bank for assistance with the factoring
transaction. Below is a brief summary of the bank’s terms:
1.) BNF will give 80% of the value of accounts receivable as at 31 July
2020 to Pepkor. The remaining 20% will be recovered by BNF and
paid over to Pepkor.
2.) The fee is 7.5% of the accounts receivable amounted stated
above.
In order to manage Pepkor’s cash flow more effectively, the CFO has
expressed interest in using the Miller-Orr model. Pepkor invests its surplus
cash at an annual rate of 7.5% and incurs R150 per transaction on buying
and selling short-term securities. The expected daily cash balances and
their probability distributions are as follows:
Cash (R) Probability
80 000 15%
90 000 40%
100 000 45%
The acceptable lower limit of cash holding is R20 000.
1
In terms of International Financial Reporting Standards
(IFRS) 9: Financial Instruments, discuss how accounts
receivable should be measured in Pepkor’s financial
statements. In addition, provide the initial journal entry
(debit/s and credit/s) if Pepkor decided to enter into the factoring transaction.
2
Based on management’s forecast and using the Miller-Orr
Model, calculate the target cash level GOL should hold in
order to allow for effective management of their cash flows.
Below is the formula for Miller-Orr:
Optimal return point =
3√3 x cost per order x variance of daily cash balances)/(4 x
daily interest rate on marketable securities)
+
Lower cash limit
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Deletesorry i am not able to solve cost of preference shares. The cost of debt and cost of equity is given in question the dividend yield and yield to maturity respectively. The cost of debt is 14.4% after tax. dividend yield and cost of equity formula are same the slight difference is growth rate which is nil in this question.
Delete2nd question : return point = 20,000 +(1/3*(3[(3*150*51000000)/4* 0.075/365]^1/3
20,000 +(1/3*(3[(22, 95,00,00,000 )/4* 0.000205]^1/3
= 20,000+(1/3*91,084.44)
=50,361.48
Cash 29,60,000
loss of factoring 2,77,500
Due from factor 4,62,500
To Account Receivables 37,00,000
Nice Article. Thank you for sharing the informative article with us.
ReplyDeleteinvest in stocks
stock
dividends
A campany has recently come out with a preference share issue to the tune of Rs.100
ReplyDeletelakhs. Each preference share has a face value of 100 and a dividend of 12% payable. The
shares are redeemable after 10 yrs. at a premium of Rs.4 per share. The company hopes
to realize Rs.98 per share now. Calculate the cost of preference capital.
Kp = (I+(RV-NP/n))/(RV+NP)/2
Delete= (12,00,000 + (104,00,000-98,00,000/10))/(104,00,000+98,00,000)/2
= (12,00,000 + (6,00,000/10))/(202,00,000/2)
= 12,00,000 + 60,000 / 101,00,000
= 12,60,000/101,00,000
= 12.47%
Kp = Dp+ ((RV-NP)/n)/ (RV+NP)/2
ReplyDelete= 4.8 + ((84-67.6)/8)/ (84+67.6)/2
= 4.8 + (2.05 / 75.8)
= 4.8 + 0.027
Shouldn't 4.8 be added to 2.05 before it getting divided by 75.8 according to the formula?
Yes, first of all redeemable value subtracted with net proceeds and then divided with number of years and after that add the interest
DeleteA company issued 100 10% preference share of Rs.100 each
ReplyDeleteCost of issue is Rs.3 per share.. Calculate cost of preference share capital if 1)at per value 2)at 5%discount 3)at 10% premium
Corporate tax rate is 50%
Please reply
1) D = 10% of 10,000=Rs. 1000
DeleteNP = 10,000 - 300 =Rs. 9700
Cost of issue is Rs. 3 per share =Rs. (100*3)= Rs.300
Kp= D/NP =(1000/9700)*100= 10.31%
2) Discount = 10,000*0.05 = Rs.500
NP = 10,000 - 500-300 = Rs 9200
Kp = D/NP = (1000/9200)*100 = 10.87%
3) Premium = 10/100*10000 = Rs. 1000
NP = 10,000 +1000-300 = 10,700
Kp = D/NP = (1000/10,700)*100 = 9.35%
PQR Ltd. issued 60,000, 12% redeemable preference share of Rs.100 each at a premium of Rs.5 each, redeemable after 10 years at a premium of Rs. 10 each. The flotation cost of each share is Rs.3. Calculate cost of preference share capital ignoring dividend tax.
ReplyDeleteDividend = 12% of 100 =Rs. 12each
DeleteNet Proceeds = 100+5 -3 =Rs. 102 each
Redeemable value = 100 + 10 =Rs. 110 each
n=10 years
Kp =( D+ (RV - NP/n))/((RV + NP)/2)
= (12+ (110-102/10))/(110+102)/2)
= 12 + (8/10)/(212/2)
= 12+0.8/106
= 12.8/106
= 12.07%
Following is the capital structure of PQR Ltd.:
ReplyDeleteParticulars
Amount (In Lakhs)
Equity Share Capital (10 Lakh shares)
100
12% Preference Share Capital (10,000 shares)
10
Retained Earnings
120
14% Debentures (70,000 debentures)
70
14% Term Loan
100
400
The Market price per equity share is Rs.25. The next expected dividend per share is Rs.2 and is expected to grow at 8%. The preference shares are redeemable after 7 years at par and are currently quoted at Rs.75 per share. Debentures are redeemable after 6 years at par and their current market quotation is Rs. 90 per debenture. Tax rate is 50%. Compute cost of Preference shares.
Dividend = 12
Deletenet proceeds = 75
redeemable value = 100
kp= 12+((100-75)/7)/((100+75)/2)
= 12+(25/7)/(175/2)
= 12+ 3.57/87.5
= 15.57/87.5
=17.79%
ltd. issued 10,000, 10% redeemable preference
ReplyDeleteshares of Rs.100 each. The shares are redeemable
after 10 years at a premium of 5%. The cost of
issue is Rs.2 per share. Find out the cost of
redeemable preference share capital.
Dividend = 10
DeleteNet proceeds = 100-2 =98
Redeemable value = 100+5 =105
Kp= 10+((105 - 98)/10)/(105+98)/2
= 10 + (7/10)/(203/2)
= 10+0.7/101.5
= 10.7/101.5
= 10.54%
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ReplyDeleteFace value of Preference share is Rs 100, Dividend Rate 8%, Maturity Period 5 years;
ReplyDeleteCurrent Market Price is Rs 95. compute cost of preference shares?
Dividend=8
DeleteNet proceeds =95
Redemption value = 100
Kp= I + (RV-NP)/n/(RV+NP)/2
= 8+ (100-95)/5/(100+95)/2
= 8+ (5/5)/(195/2)
= 8+ 1/97.5
= 9/97.5
= 9.23%
This comment has been removed by the author.
ReplyDeleteDividend = Rs.10
DeleteRedeemable value = Rs.105
Net proceeds = Rs. 110
n= 15 years
Kp = 10+((105-110)/15)/ (105+110/2) *100
= 10+ (-5/15)/(215/2) *100
= 10+(-0.33)/107.5 *100
= (9.66/107.5)*100
= 8.99%
Thank you!!
DeleteHow can i find Cost of capital of prefference shares given the percentage of Shares and Current markeg Value?
ReplyDeleteCalculate dividend of preference shares with the help of given dividend rate and then divide the dividend amount with market value to get cost of preference shares.
DeleteHOW TO CALCULATE COST OF PREFERENCE CAPITAL WHEN VALUE OF PREFERENCE SHARE NOT GIVEN
ReplyDeleteAssume Rs.100 face value of preference shares each.
DeleteA Company Issues 1000, 7% Preference shares of Rs 100 each at a premium of 10% redeemable after 5 years at
ReplyDeletepar. Compute the Cost of Preference Share Capital.
NP = 100+10 = Rs. 110
DeleteRV = Rs. 100
D = Rs. 7
Kp = 7 + ((100-110)/5)/((100+110)/2)
= 7 + (-10/5)/(210/2)
= 7 + (-2)/105
= 5 /105
= 4.76%
Glyson Perfumes ltd (GPL) is considering making an issue an 8% preference share with a par value of ksh 76,400,000 in a bid to inject new capital into their growth agenda for the year 2022. The company is however not very sure how the financial market will respond to this issue. The board feels that if the election heat visits the country, then the capital market will be depressed in which case the company may be compelled to make the issue at a discount of 5%. However, if the regime change happens peacefully, then market fundamentals will be strong enough to enable the company make the issue at a premium of 4%.
ReplyDeleteDue to the uncertainty around the election related market dynamics, the company is considering just a par issue.
Required:
Calculate the spread of cost of preference shares from the lowest to the highest in these three options
1) issued at par:
DeleteDividend = ksh 6,112,000 , Net proceeds = ksh 76,400,000
Kp = (6, 112,000/76,400,000 ) *100 = 8%
2) Issued at discount:
Dividend = ksh 6,112,000 , Net proceeds = ksh 72,580,000 (76,400,000 *95)
Kp = (6, 112,000/72,580,000 ) *100 = 8.42%
3) Issued at premium:
Dividend = ksh 6,112,000 , Net proceeds = ksh 79,456,000 (76,400,000 * 104)
Kp = (6, 112,000/79,456,000 ) *100 = 7.69%
Spread cost of preference shares = 8.42 - 7.69 = 0.73%
A company issues 1000 10%. Preference shares of ₹100 each at a discount of 5%. Costs of rising capital are ₹2000. Compute the cost of Preference Capital.
ReplyDeleteDividend = Rs.10,000 , Net proceeds = Rs.93,000(1,00,000-5,000-2000)
DeleteKp = 10,000/93,000 = 10.75%
Stock Value Calculator – How Much Is The Stock Worth
ReplyDeleteStock Value Calculator
A company issue 10% irredeemable preference share. The face value per share is #100 but the issue price is #105 what is the cost of preference share?
ReplyDeleteDividend = 10
DeleteNet proceeds = 105
Kp = (10/105) *100
= 9.52%
Thanks
ReplyDeleteThank you Asan Kam
ReplyDeleteA company’s preference share is trading at BSE at Rs. 110. The preference share is a redeemable share and the Company will redeem them after 15 years at a premium of 5% - that is, it will be redeemed after 15 years at Rs. 105; and it is 10% Preference Share – the company will pay a dividend of Rs. 10 every year. You are required to determine the cost of preference shares to the Company.
ReplyDeleteNP= Rs. 110
DeleteRV = Rs. 105
Dividend = Rs. 10
Kp = 10 + (105-110)/15)/(105+110)/2)
= 10 + (-5/15)/(115/2)
= 10+ (-0.33/57.5)
= 9.67/57.5
= 16.8%
How come 105+110 will be 115 ?
DeleteThe company wants to issue equity share of 100 each. The floating cost per share is 4 % of market price. The company wants to pay dividend of Rs 6 per share. The growth rate of dividend is estimated to be 5% . Calculate the cost of new equity capital?
ReplyDeleteKe = (dividend/ current share price) + growth rate
Delete= (6/100-4) + 0.05
= (6/96)+0.05
= 0.0625 +0.05
= 0.1125
= 11.25%
Thank you for useful post,
ReplyDeleteBut I have question on the way you are using formula for redeemable preference share cost, do we add dividend after All division ➗ or?
Because I have seen where you have used it in different ways on first two questions.
Thank you.
Thanks for your comment and for asking question and sorry by mistake I add the dividend at last in 2nd question of redeemable preference shares.
Deleteformula = (d+((rv-np)/n) /((rv+np)/2)
first solve (rv-np)/n and then
add dividend with solution of (rv-np)/n
5. Zatex Ltd. had the following capital structure as at 31 March 2017:
ReplyDeleteShs.
Ordinary share capital (200,000 shares) 4,000,000
10% Preference share capital 1,000,000
14% Debenture capital 3,000,000
8,000,000
Additional information:
1. The market price of each ordinary share as at 31 March 2017 was Shs. 20.
2. The company paid a dividend of Shs. 2 for each ordinary share for the year ended 31 March 2017.
3. The annual growth rate in dividends is 7%.
4. The corporation tax rate is 30%.
Required:
(i) Compute the weighted average cost of capital of the company as at 31 March 2017.
use weighted average cost of capital formula
Delete= Ke*(Euity/total capital) + Kp*(Preference shares/Total capital) + Kd*Debt/Total capital
Ke = (dividend / market value) + growth rate
Kp = dividend/ market value
kd = d (1-t)/market value
Can someone please help me with this question:
ReplyDeleteFind out the kp and kd for the following information-
Assuming tax at 35%, debt to total funds= 2:5, preference capital to equity capital= 1:1, preference dividend rate @ 15%, Interest on debentures= Rs 20000 for half year
EBIT at 30% capital employed is Rs 3,00,000. And Ke given is 24%
The share capital of a company is the amount that is owned by all its shareholders. The share capital is also known as the equity in a company.
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