Cost of preference share capital:
Cost of preference share capital is that part of cost of capital in which we estimate the amount which is payable to preference shareholders in the form of dividend with fixed rate. Even, dividend to favorite shareholder is on the desire of board of directors of company and preference shareholder can''t pressurize for paying dividend but it does not mean that computed of cost of pref. share capital is not essential because, if we don''t pay the dividend to pref. shareholders, it can affect on capability to receive funds from this source.