Gce Model Questions Vol1 2019 Commerce Question 13
Practice objective / multiple choice question 13 from the 2019 Gce Model Questions Vol1 Commerce examination.
A company needs to raise \(\text{₦}5,000,000\). It can either (i) obtain a bank loan at 9\% interest per annum, with interest tax‑deductible at a corporate tax rate of 30\% and a flotation cost of 2\% of the loan amount; or (ii) issue 10\% preference shares, whose dividends are not tax‑deductible, with a flotation cost of 5\% of the issue amount. Which source of finance has the lower after‑tax cost, and what is that cost (expressed as a percentage of the net funds received)?
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About This Question
This is Gce Model Questions Vol1 2019 Commerce Question 13. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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