A preference share pays an annual dividend of Rs. 12 and currently sells for Rs. 100. Ignoring issue costs, what is the cost of preference shares?
Correct answer: C. 12%
- A. 8%
- B. 10%
- C. 12%
- D. 20%
Explanation
The cost of irredeemable preference shares is calculated as the annual preference dividend divided by the current market price. Rs. 12 divided by Rs. 100 gives a cost of 12 percent.
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