Preference shares of Dunmovin pay a dividend of $2.5 each year and trade at a price of $25. What is the cost of preference share capital for Dunmovin?

Name: Preference shares of Dunmovin pay a dividend of $2.5 each year and trade at a price of $25. What is the cost of preference share capital for Dunmovin?
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Question

Quizplus · Accepted Answer

The cost of preference share capital is calculated by dividing the annual dividend by the current price of the share. Here, $2.5 / $25 = 0.10 or 10%.

Preference Shares of Dunmovin Pay a Dividend of $2