Q 1. (a) (i) A 10 year preference share of face value INR 500 has been floated by Martial Munich Ltd. The firm confirms
Posted: Sun Jun 05, 2022 7:11 am
Q 1. (a)
(i) A 10 year preference share of face
value INR 500 has been floated by Martial Munich Ltd. The firm
confirms to pay a dividend of 12 percent to be calculated on a
quarterly basis. The preference share is redeemable at a premium of
INR 20 percent. You are required to calculate the present value of
this preference share if an investor’s required rate of return is
16 percent.
Also, at what required rate of return of the
investor, will the present value of all the future inflows be
equivalent to the cash outflow?
(i) A 10 year preference share of face
value INR 500 has been floated by Martial Munich Ltd. The firm
confirms to pay a dividend of 12 percent to be calculated on a
quarterly basis. The preference share is redeemable at a premium of
INR 20 percent. You are required to calculate the present value of
this preference share if an investor’s required rate of return is
16 percent.
Also, at what required rate of return of the
investor, will the present value of all the future inflows be
equivalent to the cash outflow?