Preference shares
You'll learn how to calculate the cost of preference shares and understand why they're treated differently from debt in financial analysis. This video covers the key characteristics of preference shares—fixed dividends and irredeemability—and explains why tax relief doesn't apply, unlike with debt.
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In this lesson
- 0:00 Preference shares overview
- 0:09 Why taxation doesn't apply
- 0:18 Calculating cost of preference shares
About this lesson
You'll work through the formula (cost = D/P₀) used to determine preference share costs, essential knowledge for Financial Management and Advanced Financial Management papers. This concept appears regularly in exam questions on weighted average cost of capital and capital structure decisions.
Duration: 1m
Transcript
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