Question

a) A company with 10,000 shares of Rs 100 each declares an annual dividend of $5\%$.
(i) What is the total amount of dividend paid by the company?
(ii) What would be the annual income of a man, who has 72 shares in the company?
(iii) If he received only $4\%$ on his investment, find the price he paid for each share.

b)
A company with 4000 shares of nominal value of Rs 110 each declares an annual dividend of $15\%$, Calculate:
(i) the total amount of dividend paid by the company.
(ii) the annual income of Shahrukh who hold 88 shares in the company.
(iii) if he received only $10\%$ on his investment, find the price Shahrukh paid for each share.

[6 MARKS]

Answer 1

Each subpart: 3 Marks each

a) (i) Total face value = Rs 100 $\times$ 10,000 = Rs 10,00,000
Total amount of dividend = $5\%$ of Rs 10,00,000 = Rs 50,000
(ii) Annual income on 72 shares = $5\%$ of Rs (72 $\times$ 100)
$=Rs\frac{5}{100}\times 72\times 100=Rs360$
(iii) Price paid for each share = $\frac{Dividend}{\%returnoninvestment\times No.ofshares}$
$=\frac{360}{\frac{4}{100}\times 72}=Rs\frac{360\times 100}{72\times 4}$
$\Rightarrow$ Price paid for each share = Rs 125

b)
(i) Total amount of dividend paid by the company
$15\%of4000\times 110=Rs\frac{15}{100}\times 4000\times 110$
= Rs 66000
(ii) Annual income of Shahrukh = $15\%of88\times 110=Rs\frac{15}{100}\times 88\times 110=Rs1452$
(iii) Dividend on 1 share = $15\%of110=Rs\frac{15}{100}\times 110=Rs16.50$
Let price paid by Shahrukh for each share = Rs $x$
His profit on one share = $10\%$ of $x$ = Rs $\frac{x}{10}$
$\frac{x}{10}=16.50\Rightarrow x=Rs165$
Thus, price paid by Shahrukh for each share = Rs 165.