Neco Model Questions Vol1 2020 Commerce Question 40
Practice objective / multiple choice question 40 from the 2020 Neco Model Questions Vol1 Commerce examination.
A company needs to raise \(2,000,000\) naira. Option A: a bank loan at \(9\%\) simple interest per annum with a processing fee of \(1\%\) of the loan amount, repayable after 4 years. Option B: issue 30,000 ordinary shares with a face value of \(50\) naira each at a market price of \(70\) naira per share, paying a dividend of \(6\%\) of the face value per year and incurring a flotation cost of \(3\%\) of the total amount raised. Ignoring taxes, which option results in the lower total cash outflow over the 4‑year period?
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About This Question
This is Neco Model Questions Vol1 2020 Commerce Question 40. It is one of the objective questions from the 2020 Neco Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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