Question

if the face value of both the shares is same then which investment out of the following is more profitable

company A: Divident 16% , MV=rupee 80

company B) dividend 20% MV=rupee 120

Answer 1

for company A.mv=₹80,dividend=16°/•
o n investment of ₹80
company A gives dividend of ₹16
let the rate of return be x
therefore,16/18=×/100
×=20°/•
therefore,RoR of company A is 20 percent

for company B ,mv=120Rs
dividend is 20 percent
on investment of Rs 120
Company B gives dividend of Rs20
Let the rate of return be x
20/120=×/100

therefore x=16.66°/•

therefore,RoR of company B is more profitable.

Answer 2

Answer:Let x be the face value.

For company A:-

MV =Rs.80

Dividend rate =16%

Dividend per share = Face value × rate

⇒ Divident per share =x×

100

16

​

=

25

4x

​

Rate of return =

MV

Dividend per share

​

⇒ Rate of return =

25

4x

​

×

80

1

​

=

500x

1

​

For company B:-

MV =Rs.120

Dividend rate =20%

Dividend per share = Face value × rate

⇒ Divident per share =x×

100

20

​

=

5

x

​

Rate of return =

MV

Dividend per share

​

⇒ Rate of return =

5

x

​

×

120

1

​

=

600x

1

​

Now,

$$\because \cfrac{1}{500x} > \cfrac{1}{600 x}$$

⇒ Rate of return of company A is greater than that of company B.

Hence company A is more profitable than company B.

Step-by-step explanation: