Advice the Ghanaian multinational which one is cheaper.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
- A Ghanaian multinational company is raising a one-year loan of one million pounds sterling (£ 1,000,000) from the HSCB bank of UK at 8% per annum. Prudential Bank of Ghana is offering the equivalent of the above amount in cedi at 22% per annum. The current exchange rate between the cedi and the pound is 17000cedis. Consultants to the loan indicate that there are 40%, 30% and 20% chance that the pound sterling would strengthen by 15%, 10% and 5% respectively against the cedi at the end of the year when the loan is due.
Advice the Ghanaian multinational which one is cheaper.
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