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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]

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Solution

Each subpart: 3 Marks each

a) (i) Total face value = Rs 100 × 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 × 100)
=Rs 5100×72×100=Rs 360
(iii) Price paid for each share = Dividend% return on investment×No. of shares
=3604100×72=Rs 360×10072×4
Price paid for each share = Rs 125

b)
(i) Total amount of dividend paid by the company
15% of 4000×110=Rs 15100×4000×110
= Rs 66000
(ii) Annual income of Shahrukh = 15% of 88×110=Rs 15100×88×110=Rs 1452
(iii) Dividend on 1 share = 15% of 110=Rs 15100×110=Rs 16.50
Let price paid by Shahrukh for each share = Rs x
His profit on one share = 10% of x = Rs x10
x10=16.50x=Rs 165
Thus, price paid by Shahrukh for each share = Rs 165.


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