Question

Under the yield method of valuation of equity share capital, if for an equity share of ` 50, the normal rate of return is 10% and expected rate of return is 5%, then the value of an equity share will be

Answer 1

Tax Deducted at Source (TDS) is a system introduced by Income Tax Department, where person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment.

Answer 2

Value of equity share = 50

Explanation:

Given:

Paid up value of each equity Share = 50

Normal rate of return = 10% = 0.1

Expected rate of return = 5% = 0.05

Value of equity share = ?

Computation:

Value of equity share = (Expected rate of return / Normal rate of return) x 100

Value of equity share = (0.05 / 0.1) x 100

Value of equity share = 0.5 x 100

Value of equity share = 50

Therefore, value of each equity share under Yield method is rs 50.

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