Uma
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narahari
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They are a hybrid security between debt and equity. The shareholders are paid a dividend yearly. Though, this payment is not tax-deductible but the company is required to make payments
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lochan
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**COST OF PREFERENCE CAPITAL**
They are a hybrid security between debt and equity. The shareholders are paid
a dividend yearly. Though, this payment is not tax-deductible but the company
is required to make payments; since, if it does not pay, it can’t pay dividends to
the equity holders. Also, preference dividend, if unpaid, gets accumulated over
years. Preference shares may be redeemable/irredeemable. (now irredeemable
preference shares are not allowed. Have to be redeemed in maximum 10 years)
Cost of preference share capital Kp is the annual preference share dividend
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