Q. Cost of Redeemable Preference Share Capital?
Cost of Redeemable Preference Share Capital: - Redeemable preference capital has to be returned to the preference shareholders subsequent to a stipulated period. The cost of redeemable preference share capital is computed as follows:
D + 1/n (RV -NP)
Kpr = n X 100
1/2 (RV +NP)
Kpr = Cost of Redeemable Preference Capital
D = Annual Preference Dividend
NP = Net Proceeds of Preference Share Capital
n = Number of years
RV = Redeemable Value of Preference Share Capital