The cost of preference shares: Billy's Goat Coats has a preference share issue outstanding with a current price of $38.89. The company last paid a dividend on the issue of $3.50 per share. What is the company's cost of preference shares?
A) 7%
B) 8%
C) 9%
D) 10%

Question

Quizplus · Accepted Answer

The cost of preference shares is calculated as the dividend divided by the current price. Here, $3.50 / $38.89 = 0.09 or 9%.

The Cost of Preference Shares: Billy's Goat Coats Has a Preference