A Firm Has $3 Million Market Value and It Sells

question 80

Multiple Choice

A firm has $3 million market value and it sells preference shares at $100 per share. If the annualdividend on the preference share is $9 and it trades at $95, what is the cost of preference share capital?

• A) 9.47%
• B) 10.41%
• C) 8.75%
• D) 10.21%

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Definitions:

Rick of Firewood

A specific measure of stacked firewood, often used to quantify firewood in cord-like units.

Bearer Instrument

A type of negotiable instrument that is payable to the holder or presenter, rather than a named individual.

Payable to Cash

A term indicating that a financial instrument, like a check, is written in such a manner that it can be cashed or negotiated by any holder, not just a specific payee.

"Pay to the Order of Bearer"

A phrase used on checks or other negotiable instruments that indicates the person possessing the document has the right to cash or negotiate it.