Question

Following details are extracted from the records of a company:

`

2000 9% Preference Shares of ` 100 each 2,00,000

50,000 Equity shares of ` 10 each, ` 8 per share paid up 4,00,000

Expected Profit 2,18,000

Tax Rate 40%

Transfer to general reserve 20%

Normal rate of earning 15%

Yield value per share is ___________.

(a) ` 15 (b) ` 11.55

(c) ` 16 (d) ` 17.50​

Answer 1

Answer:

the yeild value share is 15

Answer 2

(a) Yield value per share = ₹15

Calculation of Yield value per share:

Expected profit                  : 218000

tax rate @40%                    : 87200

After tax profit                    : 130800

transfer to reserve@20%  : 26160

profit left for distribution  : 104640

Yield value per share = 1/PE ratio

                                      = 1/6.66*100 = ₹15

PE ratio = share price / earning per share

             = 10/1.5 = 6.666

earning per share = net income/ no. of shares outstanding

                             =  60000/40000 = 1.5