If the face value of both the shares is same, then which investment out of the
following is more profitable?
Company A : Dividend 16%, MV = 80,
Company B : Dividend 20%, MV = 120.
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Step-by-step explanation:
Let the FV of each type of share be Rs. 100
Company A:Dividend 16%,MV Rs. 80
on investing Rs. 80 share, dividend is Rs. 16.
Rate of Return =Dividend / Investment into 100
=16/80*100=20%
Company B: Dividend 20%,MV Rs.120
= 20/120*100=16.67%
From the above solution, Company A is more profitable.
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