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

True

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False

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Solution

The correct option is A
True

The cost of equity shares is generally more as compared to the cost of raising funds through other sources, as the underwriting commission and brokerage cost are high for equity shares.

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

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

Q. Cost of equity share capital is more than cost of debt because _________________.

"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. Name the financial instrument which may be used in the following situation.
A company needs funds to meet flotation cost in order to issue equity shares in the market.

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

The correct option is A True The cost of equity shares is generally more as compared to the cost of raising funds through other sources, as the underwriting commission and brokerage cost are high for equity shares.

The correct option is A
True

The cost of equity shares is generally more as compared to the cost of raising funds through other sources, as the underwriting commission and brokerage cost are high for equity shares.