Question

shares of FV Rs. 10 of two companies are available as follows .
company A : MV Rs. 25, rate of dividend 24%
company B : MV Rs. 20, rate of dividend 18%
state with reason, which shares you will prefer to purchase​

Answer 1

Answer:

9.6% is greater than 9% so i will prefer Company A.

Step-by-step explanation:

Company A :

Face value of the share = 10 Rs.

Market Value of the share = 25 Rs.

Dividend per share = 24% of Face value

                                = 0.24 × 10

                                = 2.40 Rs.

Rate of return on investment = $\frac{Dividend}{Market Value}\times 100$

                                                = $\frac{2.40}{25} \times 100$

                                                = 9.6%

Rate of return of company A is 9.6%

Company B :

Face value of the share = 10 Rs.

Market Value of the share = 20 Rs.

Dividend per share = 18% of Face value

                                = 0.18 × 10

                                = 1.8 Rs.

Rate of return on investment =  $\frac{1.80}{20} \times 100$

                                                = 9%

Rate of return of company B is 9%.

9.6% is greater than 9% so i will prefer Company A.

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