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Why the cost of preference share is less then the cost of equity?
Wiki User
∙ 13y ago
preference shares are more costlier because:-
1. they get preference for repayment of capital
2.they get preference for payment of dividend
3.they are less risky
4. can get charge over fixed assets
5.they are also convertible
ans can further be expanded using these points
Wiki User
∙ 13y ago
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What is the difference between preference share and debentures?
Debenture and Preference shares are often confused with each other,, Basically Preference share is an equity type instrument but debenture is a straight forward loan. Debenture bear fixed interest and its a TAX deductible expense. Company may goes into liquidation if it fails to pay interest on debenture. on the other hand company pay wish to choose not paying any dividend to preference share holder in any given period. debenture holder are lender to company Preference share holder owns the company
Advantages and disadvantages of preference share?
Some of the advantages of the preference share is the absence of the fixed regular income and less capital loses. Some of the disadvantages includes the dilution of claim over assets and the high rate of dividends.
Is cost of equity capital less than cost of debt capital?
Cost of equity > Cost of debt Reason: When u issue debt, for example in the form of bonds, u have to pay bondholders interest. This interest is tax deductible. On the other hand, when u issue equity, i.e. stocks, u pay dividends. This dividend is taxed as corporate income. Because of the ability of debt to escape taxation vis-a-vis equity, cost of debt is lower than cost of equity. In fact, this is called a debt tax shield.
Does stock dividend increase owner's equity?
No, all it does is give each shareholder more shares but each share is of proportionately less value. Net-net, the only impact is to reduce share price.
Why does the weighted average cost of capital of firms that uses more debt capital lower that that of a firm that uses less debt capital?
Because the cost of debt is generally lower than the cost of equity. This is because in case of financial distress, debt-holders are repaid before the equity holders are, as well as because debt has the assets of the firm as collateral and equity does not.
Why plastic furniture like doors and stools gaining preference over wooden furniture?
*deforestation *less cost *weight
When borrowing is less than equity the company is said to be?
Trading equity
Is owners equity equal to the business liabilities less the business assets?
No. Owners Equity is equal to Business Assets less Business Liabilities.
How can the price of a company's share be less than the face value of the share?
How can the price of a company's share be less than the face value of the share?" How can the price of a company's share be less than the face value of the share?"
How much money can you get from reverse mortgages?
It varies depending on how much equity you have in your home. If you have a lot of equity, you can get more, if you do not, then you will get less.
What is an description of equity?
Equity is the dollar amount of value in an investment. It can be more or less than the actual amount paid for the item.
Is it good if the equity is low or high?
High. Equity is the difference between what is owed and what something is worth. For instance if you owe 5,000 on a car, but the car is worth 3,000 there is a negative equity of 2,000. The less you owe the higher the equity.
