Question

A company with 10,000 shares of nominal value Rs 100 declares an annual dividend of 8% to the share-holders.

(i) Calculate the total amount of dividend paid by the company.

(ii) Ramesh has bought 90 shares of the company at Rs 150 per share. Calculate the dividend he receives and the percentage of return on his investment.

Answer 1

(i) Nominal value of 1 share = Rs. 100
Nominal value of 10,000 shares = Rs. 100 $\times$ 10,000 = Rs. 10,00,000
Dividend% = 8%
Dividend = 8% of Rs. 10,00,000 = $\times$ 𝑅𝑠. 10,00,000 = 𝑅𝑠. 80,000

(ii) Market value of 90 shares = Rs. 150 $\times$ 90 = Rs. 13,500
Nominal value of 90 shares = Rs. 100 $\times$ 90 = Rs. 9,000
Dividend = 8% of Rs. 9,000
= $\times$ 𝑅𝑠. 9,000 = 𝑅𝑠. 720

Return% = $\times$ 100%
= $\times$ 100%
= 5.33 %.