Cost of redeemable preference share capital, Financial Management

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Q. Cost of Redeemable Preference Share Capital?

Cost of Redeemable Preference Share Capital: - Redeemable preference capital has to be returned to the preference shareholders subsequent to a stipulated period. The cost of redeemable preference share capital is computed as follows:

D + 1/n (RV -NP)

Kpr = n X 100

  1/2 (RV +NP)

Kpr = Cost of Redeemable Preference Capital

D = Annual Preference Dividend

NP = Net Proceeds of Preference Share Capital

n = Number of years

RV = Redeemable Value of Preference Share Capital


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