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A companyplans to raise finance for a new project.
Itis considering either the issue of a redeemable cumulative preference share or a Eurobond.
Advise the directors which of the following statements would justify the issue of preference shares over a bond?
Suggested Answer: A, B, E
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38 comments · newest first
DE
Devon
12 months ago
Not sure about the tax relief part, sounds too good to be true.
BE
Beckie
12 months ago
Preference shares reduce gearing, which is definitely a good thing.
ER
Ernest
1 year ago
Wait, can they really claim tax relief on dividends like that?
LO
Louvenia
1 year ago
Totally agree, that’s a big plus for preference shares!
BR
Brigette
1 year ago
Preference shares don’t require fixed payments if profits are low.
VA
Val
1 year ago
I thought dividends on preference shares weren't tax-deductible, which makes option D seem questionable. I need to double-check that.
ER
Erick
1 year ago
I practiced a similar question where we discussed the implications of gearing. I feel like option C could be a strong argument for preference shares.
NA
Natalya
1 year ago
I'm not entirely sure, but I remember something about preference shares being less risky for the company in tough times. Maybe option C is relevant?
AN
Anastacia
1 year ago
I think option B makes sense because if profits are low, the company can avoid paying dividends on preference shares, unlike the interest on a Eurobond.
KR
Kris
1 year ago
Hmm, I'm a bit unsure about this one. The options seem pretty technical, and I'm not super familiar with the details of hyperconvergence. I'll have to think it through carefully.
CU
Curt
1 year ago
Okay, I've got this. The answer is C - warehouse configuration template. That's the tool we use to create new warehouses based on an existing approved setup. I'm confident that's the right approach here.
CR
Cristal
1 year ago
Okay, I think I've got this. The Event Structure should capture any changes to the Front Panel controls, whether through user interaction or programmatic updates.
OD
Odelia
1 year ago
Ah yes, I remember this one from the lecture. "On-demand self-service" is the ability for a consumer to provision computing resources as needed without requiring human interaction with the service provider. Definitely the right answer here.
AU
Augustine
1 year ago
Forget the finance technicalities, I just want to know if these preference shares come with a built-in chocolate fountain. Now that's what I call shareholder value!
AV
Avery
1 year ago
User 3: I think I'll go for preference shares then, tax benefits sound good.
CA
Carylon
1 year ago
User 2: Preference shares don't come with chocolate fountains, but they do have tax benefits.
BE
Berry
1 year ago
User 1: I wish preference shares came with a chocolate fountain!
SA
Salena
1 year ago
Personally, I'm a big fan of Option D. Gotta love that sweet, sweet tax relief on those preference share dividends.
AU
Augustine
1 year ago
Kristofer: Definitely, it's a smart move to consider the tax implications when raising finance.
KR
Kristofer
1 year ago
User 2: Yeah, that tax relief could really benefit the company in the long run.
CL
Claudio
1 year ago
True, but the tax relief with Option D could potentially outweigh the lack of security with Option A.
MI
Micheline
1 year ago
But what about the security of the assets with Option A? That's also important to consider.
SC
Scarlet
1 year ago
I agree, Option D seems like the best choice for tax relief.
EM
Emiko
1 year ago
User 1: I agree, Option D seems like the best choice for tax relief.
TE
Telma
2 years ago
Haha, the company should just ask the directors to take a pay cut if profits are poor. That'll solve the interest payment problem real quick!
CR
Cristy
2 years ago
I'd have to agree with Emogene on this one. Dividends on preference shares are way more flexible than rigid bond interest payments.
TE
Terrilyn
1 year ago
D) The company can claim tax relief on the dividend paid on the preference share at a higher rate than the interest paid on the Eurobond.
DO
Dorinda
1 year ago
B) If profits are poor, dividends do not have to be paid on the preference share - however, interest would need to be paid on the Eurobond.
EL
Eleni
1 year ago
A) Preference shares are not secured against the assets of the business - however, the Eurobond would be.
ME
Melinda
1 year ago
The company can claim tax relief on the dividend paid on the preference share at a higher rate than the interest paid on the Eurobond.
DE
Dean
1 year ago
If profits are poor, dividends do not have to be paid on the preference share - however, interest would need to be paid on the Eurobond.
LA
Lavonne
1 year ago
Preference shares are not secured against the assets of the business - however, the Eurobond would be.
EM
Emogene
2 years ago
Option B is the clear winner here. No one wants to pay interest when profits are poor, so the preference shares are the way to go.
FE
Felix
1 year ago
User 2: Yeah, not having to pay dividends when profits are poor is a huge advantage.
DO
Dorsey
1 year ago
User 1: I agree, option B is definitely the best choice.
AH
Ahmad
2 years ago
I see your points, but I think option C is the most beneficial as it would reduce our company's gearing.
FR
France
2 years ago
I disagree, I believe option B is better as we won't have to pay dividends if profits are poor.
CL
Clement
2 years ago
I think option D is the best choice because tax relief on dividends can save us money.