The cost of equity shares is generally _______ as compared to the cost of raising funds through other sources.

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Solution

The correct option is A more
Equity shares is the most important source of raising long term capital by a company. Equity shares represent the ownership of the a company and thus is known as owner's capital or owner's funds.
Hence the cost of equity shares is generally higher as compared to the cost of raising funds through other sources.

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Q. The cost of equity shares is generally as compared to the cost of raising funds through other sources.

The cost of equity shares is generally more as compared to the cost of raising funds through other sources.

Q. 'Mission Coach Ltd.' is a large and creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves a huge flotation cost. To meet the expenses of the flotation cost, the company decides to tap the money market.
(a) Name and explain the money-market instrument the company can use for the above purpose.
(b) What is the duration for which the company can get funds through this instrument?
(c) State any other purpose for which this instrument can be used.

"Mission Coach" is a large creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expense of floatation cost, the company decides to tap the money market.

(i) Name and explain the money market instrument the company can use for the above purpose.

(ii) What is the duration for which the company can get funds through the instrument?

(iii) State any other purpose for which this instrument can be used.

Q. Match the items of the following two lists and suggest the correct code:

List-I	List-II
(a) Realised yield method	(i) Cost of equity share capital
(b) Taxation	(ii) Cost of equity capital
(c) Cost of total capital employed	(iii) Cost of debt capital
(d) Dividend growth is a consideration	(iv) Weighted cost of capital

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