Waec Model Questions Vol1 2020 Commerce Question 12
Practice objective / multiple choice question 12 from the 2020 Waec Model Questions Vol1 Commerce examination.
A firm needs ₦5,000,000 for expansion. It can either (i) obtain a bank loan at 12% simple interest per annum, with interest expense giving a tax shield at a 30% corporate tax rate, or (ii) issue ordinary shares at a issue price of ₦1,200 each, paying a dividend of 15% of the nominal value (₦1,000) per share each year. Which source of finance will result in the lower annual cost to the firm after tax?
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About This Question
This is Waec Model Questions Vol1 2020 Commerce Question 12. It is one of the objective questions from the 2020 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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