Waec Model Questions Vol1 2017 Commerce Question 44
Practice objective / multiple choice question 44 from the 2017 Waec Model Questions Vol1 Commerce examination.
A company needs to raise ₦10,000,000. It can either (i) obtain a bank loan at 12% simple annual interest payable each year, with a one‑time processing fee of 2% of the loan amount, to be repaid in full after 5 years; or (ii) issue new equity shares at a market price of ₦500 per share, offering an 8% dividend yield per annum, and incurring a flotation cost of 1% of the amount raised. Assuming the dividend is paid each year for the 5‑year period, which source of finance has the lower total cost over the 5 years, and what is that total cost?
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About This Question
This is Waec Model Questions Vol1 2017 Commerce Question 44. It is one of the objective questions from the 2017 Waec Model Questions Vol1 Commerce examination.
Difficulty level: Medium .
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