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Question

A dividend of 9% was declared on INR 100 share selling at certain price.If the rate of return is 7.5%.
Calculate:
a) the market value of the share.
b) the amount to be invited to obtain an annual dividend of INR 630.

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Solution

(a)
Dividend (d)=9%
Face value (FV)=Rs.100
Return (r%)=7.5%
FV×d%=MV×r%
100×9%=MV×7.5%
100×9100=MV×7.5100

MV=9×1007.5
MV=Rs.120
The market value of the share is Rs.120
(b)
The amount to be innvested to obtain an annual dividend of Rs.630
630r%
6307.5%
630×1007.5
Rs.8400

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