Preference shares of Dunmovin pay a dividend of $2.50 each year and trade at a price of $25. What is the cost of preference share capital for Dunmovin?

Question

Quizplus · Accepted Answer

The cost of preference share capital can be calculated using the formula:
Cost of preference share capital = Dividend per share / Market price per share
= $2.50 / $25
= 0.1 or 10%
Therefore, the answer is D.

Preference Shares of Dunmovin Pay a Dividend of $2