Question

18. A company with 10,000 shares of Rs 100 each, declares an annual dividend or 70.
(i) What is the total amount of dividend paid by the company?
(i) What would be the annual income of a man who has 72 shares in the company?
(iii) If he received only 4% on his investment, find the price he paid for each share.
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Answer 1

Given:

A company with 10,000 shares of Rs 100 each, declares an annual dividend of 7%.

To find:

(i) What is the total amount of dividend paid by the company?

(i) What would be the annual income of a man who has 72 shares in the company?

(iii) If he received only 4% on his investment, find the price he paid for each share.

Solution:

From given, we have,

Nominal value of 1 share = Rs. 100

Nominal value of 10,000 shares = 10,000 × 100 = Rs. 10,00,000

Dividend 7%

= 7/100 × 10,00,000 = Rs. 70,000

Nominal value of 72 shares = Rs. 100 × 72 = Rs. 7200

Dividend = 7% of Rs. 7200

= 7/100 × 7200 = Rs 504

Let the market value of 1 share = Rs x

Then the market value of 10,000 share = Rs 10,000x

Return % = 4%

4% of Rs. 10,000x = Rs. 70,000

4/100 × 10,000x = 70,000

x = Rs. 175