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Cost of Capital

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Cost of Capital

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 17, 2019 at 1:52 pm #513252
    aliansari14
    Member
    • Topics: 13
    • Replies: 28
    • ☆

    hello sir,
    From BPP revision kit question number 195
    ,I don’t understand how to do this it says preference share irredeemable,

    I understand that it is equity but i can’t figure out a way to find the ex div market value and div is not given,
    can u please explain me

    April 17, 2019 at 3:44 pm #513268
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54675
    • ☆☆☆☆☆

    Preference shares have a fixed dividend.

    Since they are 8% preference shares, and the nominal/par value is $0.50, then dividend is 8% x $0.50 = $0.04 per year.

    Therefore the ex div price is $0.30 – $0.04 = $0.26.

    (Did you not look at the answer in the Revision Kit, because it shows the workings? 🙂 )

    April 17, 2019 at 11:14 pm #513322
    aliansari14
    Member
    • Topics: 13
    • Replies: 28
    • ☆

    I did but I couldn’t get it ,
    Thanks sir for the explanation 🙂

    April 18, 2019 at 6:10 am #513342
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54675
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Cost of Capital’ is closed to new replies.

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