Waec Model Questions Vol1 2017 Commerce Question 34

Practice objective / multiple choice question 34 from the 2017 Waec Model Questions Vol1 Commerce examination.

Waec Model Questions Vol1 2017 Commerce Objective / Multiple Choice Medium Difficulty
Question 34 WAEC_MODEL_QUESTIONS_VOL1 • 2017 • COMMERCE • objective

A small business needs ₦5,000,000. It can either (A) obtain a bank loan at 12 % simple interest per annum, repayable at the end of 3 years, or (B) issue 10,000 ordinary shares with a nominal value of ₦500 each, paying an annual dividend of 8 % on the nominal value. Ignoring any other costs, which source of finance has the lower total cost after 3 years and what is that cost?

Answer Options

A. Bank loan; total cost ₦1,800,000 (higher than the share issue cost of ₦1,200,000)
B. Bank loan; total cost ₦2,100,000 (higher than the share issue cost of ₦1,200,000)
C. Issuing shares; total cost ₦1,500,000 (lower than the loan cost of ₦1,800,000)
Correct Answer D. Issuing shares; total cost ₦1,200,000 (lower than the loan cost of ₦1,800,000)
Correct Answer
D
Correct Option:
Issuing shares; total cost ₦1,200,000 (lower than the loan cost of ₦1,800,000)

About This Question

This is Waec Model Questions Vol1 2017 Commerce Question 34. It is one of the objective questions from the 2017 Waec Model Questions Vol1 Commerce examination.

Difficulty level: Medium .

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