Question

X limited issued 10,000 equity shares of Rs.10 each at premium Rs.2 each. The company has incurred issue expenses of Rs.5,000. The equity shareholders expect dividend of $18\%$ then cost of capital is ____________.

• A. $18\%$
• B. $15.65\%$
• C. $16.65\%$
• D. $18.65\%$

Answer 1

The correct option is B $15.65\%$

K${}_e$ = $\frac{D_1}{NP}$
Where NP i.(E) Net Proceed of shares = $\frac{1000X12-5000}{10000}$
Dividend of a share (D${}_I$) = Rs. 1.8.

Hence option (B) is the correct answer.