Davis Plc. has in its share capital 100,000, $10 preferred shares paying 12% dividends. They are currently

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Question:

Davis Plc. has in its share capital 100,000, $10 preferred shares paying 12% dividends. They are currently trading at $40 per share.

a. Calculate the cost of preferred shares.

b. Calculate the price of Davis Plc. preference shares if the cost of preferred shares is 15%.