Question

A company with 10000 shares of ₹ 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

Answer 1

Given that Number of shares allocated by the company = 10000
Dividend of one share = 5 % of N.V
= 5 % of 100
= ₹ 5

Hence the total dividend paid by the company = ₹ 5 x 10000
= ₹ 50,000

ii) Number of shares owned by the man = 72
Dividend on one share = ₹ 5

Hence the annual income = 72 x ₹ 5 ( Number of shares x dividend on one share )
= ₹ 360

iii) Rate of return = 4 % ; Dividend = 5 % and N.V of one share = 100
We know Rate of return x M.V = Dividend % x N.V of one share
4 % x M.V = 5 % x 100
M.V = $\frac{5\times 100}{4}$
= ₹ 125

Hence the man paid ₹ 125 for each share