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what is cost of preference capital ?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked about 3 years ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

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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Data?1494421730 rohit awasthi answered about 3 years ago

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

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**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

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