A Firm Has $1 Million Market Value and It Sells

question 16

Multiple Choice

A firm has $1 million market value and it sells preference shares for $100 per share. If the annual dividend on the preference share is $7 and it trades at $95, what is the cost of preference share capital?

• A)7.37%
• B)7.21%
• C)7.15%
• D)6.75%

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Definitions:

Expected Rate

A forecasted value or percentage in various contexts, such as return on investment or growth, based on current and historical data.

Total Investment

The sum of all expenditures on capital goods by a business or economy during a specific period, indicating the total amount spent on investments.

Expected Flow

An estimation of the quantity of a commodity, cash, or traffic moved in a certain direction over a given period.

Future Productive

The potential or capacity for increased production or efficiency in the future, often influenced by investments in technology, education, or infrastructure.