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Which of the following statements is (are) true about preference shares? (There may be more than one correct answer. ) Select one or more: a.

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Which of the following statements is (are) true about preference shares? (There may be more than one correct answer. )

Select one or more:

a. Preference shareholders dividends are paid from profit before tax.

b. None of the other statements is true.

c. Compared to ordinary shareholders, preference shareholders require a higher expected return from their investments.

d. Preference shareholders have voting rights.

e. Preference shareholders have priority over bondholders in the case of bankruptcy.

An ordinary share is expected to pay a dividend of $2 in one year, $5 in 2 years and $6 in 3 years. The annual dividend then remains unchanged at $6 until the end of year 10. From the end of year 10, the dividend will grow at 4% p.a. forever. Which of the following can be used to find the share price today if the rate of return is 15%? (There may be more than one correct answer. You will lose marks by choosing a wrong answer. The minimum mark for the question is zero.) Select one or more: 2 5 6 6 O a. + + (1 1.15-7)(1.15)-2 + 1.15 1.152 0.15 0.15 0.04 (1.15)-9 (1.15)-11 1.15 2 5 6 b. 6(1.04) + + (1 1.15-8)(1.15) -3 + 1.152 0.15 0.15-0.04 c. None of the options can be used to find the share price today. 2 5 6 d. 6(1.04) + + (1 1.15-7)(1.15)-2 + 1.15 1.152 (1.15)-10 0.15 0.15 -0.04 2 5 6 6(1.04) + + (1 - 1.15-8) + 1.15 1.152 0.15 0.15 0.04 2 5 6 f. 6(1.04) + + (1 1.15-8)(1.15)-2 + 1.15 1.152 0.15 0.15 0.04 O e. (1.15)-10

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