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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rohit awasthi
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Dear Friend > Cost of Preference Capital “ It is payable to preference shareholders in the form of dividend with fixed rate.” The preference share capital is different from equity share capital on account of two basic features : 1)the preference shares are entitled to receive dividends at a fixed rate in priority over equity shares. 2)in case of liquidation of the company ,the preference shareholders will get the capital repayment in priority over the distribution among the equity share holders. http://image.slidesharecdn.com/costofcapital-110427090145-phpapp01/95/cost-of-capital-10-728.jpg?cb=1303895895 Thanks
lochan
answered
**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
Thanks
