EDC will be issuing preference shares with a total face value of P120,000,000 for a net proceed of P122,000,000. It will be irredeemable and will pay 8% annually. If the tax rate is 25%, what is the effective cost of the preference shares?

EDC will be issuing preference shares with a total face value of P120,000,000 for a net proceed of P122,000,000. It will be irredeemable and will pay 8% annually. If the tax rate is 25%, what is the effective cost of the preference shares?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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