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Question 18.10: Assume everything to be the same as contained in Example 18.......

Assume everything to be the same as contained in Example 18.9, except that the Indian rupee is likely to appreciate by 2 per cent each year in relation to US dollar, for 6 years. Determine the effective cost of preference shares from the point of view of the parent company.

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\qquad \,k_p = 12% (1 + 0.02) (1 + 0.0195) + 2%
\qquad \quad= 12.48% + 2% = 14.48 per cent
\,  Its precise value can be determined based on the IRR equation; its computation is not discussed so as to avoid repetition.

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