10000 16% participation preference shares of $1 each =$10000 ( each participating preference share partcipate equally in ordinary dividend per share once the ordinary shares exceed 20c per share this right will last for 3 years).


At 1 March 2010, the dividend yield for participating preference shares was 13%. It was envisaged that @ 28 February 2011 ordinary dividends will exceed 20c per share cut off by $11,000 in total and this situation was expected to last for 3 years. Preference dividends are also paid out at the same date.


Calculation of value of one participating preference share @ 28 February 2010

use a calculation of the present value of the future earnings