Gce Model Questions Vol1 2017 Commerce Question 37
Practice objective / multiple choice question 37 from the 2017 Gce Model Questions Vol1 Commerce examination.
A company needs to raise a net amount of \(₦500,000\). It can (i) obtain a bank loan at \(12\%\) per annum with no flotation costs, (ii) issue \(5\%\) debentures that incur a flotation cost of \(10\%\) of the issue price, or (iii) issue new ordinary shares with a nominal price of \(₦5,000\) each, an issue cost of \(2\%\) of the proceeds and an expected dividend yield of \(8\%\) per year. Assuming the company raises exactly the required net amount under each option, which source of finance has the lowest annual cost of finance? Show your calculations.
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About This Question
This is Gce Model Questions Vol1 2017 Commerce Question 37. It is one of the objective questions from the 2017 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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