Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Cost of preference shares
- This topic has 5 replies, 2 voices, and was last updated 6 years ago by John Moffat.
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- October 27, 2017 at 8:23 am #413380
Dear Sir
I am trying to find in your lectures and notes the calculation for the cost of preference shares for WACC calculations
October 27, 2017 at 2:49 pm #413405It is exactly the same as the calculation of the cost of ordinary shares, except it is easier because preference shares have a constant dividend and therefore g = 0 !!
(I go through examples with preference shares in some of the lectures working through past exam questions.)
October 27, 2017 at 3:14 pm #413415Thank you very much.
One more question, if WACC id requested such as in Fence (6/14), do we assume market value or book value if not specified?
October 28, 2017 at 9:56 am #413483We always calculate the WACC using market values (unless the question specifically says to use nominal (book) values, which is very unlikely indeed). The question Fence uses market values, which is correct.
October 28, 2017 at 11:27 am #413507Thank you
October 29, 2017 at 8:18 am #413559You are welcome 🙂
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