4.6.1 Cost of Redeemable ference Shares Preference shares issued by a company which are redeemed on is maturity i Called redeemable preference shares. Cost of redeemable preference shar i Simiar to the cost of redeemable debentures with the exception that the Givdends pad tothe preference shareholders are not tax deduce. Cost of ro EI Cost of Redeemable Preference Sates Ke “oy ro ‘Annual preterence ddend n= Remaining ite of preference shares, Net proceeds mean isue rice les issue expenses. issue rice not given then ot given simply assume it equal to 2010 rate that equates the net proceeds of the sale of preference shares with the presen value of the ture Gvdends and principal payments muustRaTIONS XVZ id xuee 2000 10% preference shares of € 100 each at € 95 each, The ‘company proposes to redeem the preference shares atthe end of 10th ea om the ote of tive CALCULATE te costo preference share? ros eH) z 00-95 a) 1077 approx) = 107% 4.6.2 Cost of irvedeemable Preference Shares ‘he cost of redeemable preference shares is similar to calculation of perpetuty ‘rice or net proceed from the fsve. The cost of wredeemable preference share w (ost of wredeemable Preference Share (ky Pox Net proceeds inne of preference shares XZ & Co. issues 2000 10% preference shares of € 100 each ot € 95 each ‘CALCULATE te cost of preference shores, EET son nanaccnerr