Question

A company with 4000 shares of nominal value of Rs 110 each declares an annual dividend of 15%.
(i) Calculate the total amount of dividend paid by the company
(ii) Calculate the annual income of Shah Rukh who holds 88 shares in the company
(iii) If he received only 10% on his investment, find the price Shah Rukh paid for each share.
[4 MARKS]

Answer 1

part (i): 1 Mark
part (ii): 1 Mark
part (iii): 1.5 Marks

(i) Total dividend paid by the company
$=\frac{Dividend\%\times No.ofshares\times NV}{100}$
$=Rs\frac{15\times 4000\times 110}{100}=Rs66,000.$
(ii) Annual income of Shah Rukh
$=Rs\frac{15}{100}\times 110\times 88=Rs1452.$
(iii) $NV\times Dividend\%=MV\times Return\%$
$\Rightarrow 110\times 15=MV\times 10$
$\Rightarrow MV=\frac{15}{10}\times 110=Rs165.$