A man has a choice to invest in hundred-rupee shares of two firms at Rs 120 or at Rs 132. The first firm pays a dividend of 5% per annum and the second firm pays a dividend of 6% per annum. Find :
(i) which company is giving a better return.
(ii) if a man invests Rs 26,400 with each firm, how much will be the difference between the annual returns from the two firms ?
A man has a choice to invest in hundred-rupee shares of two firms at Rs 120 or at Rs 132. The first firm pays a dividend of 5% per annum and the second firm pays a dividend of 6% per annum. Find :
(i) which company is giving a better return.
(ii) if a man invests Rs 26,400 with each firm, how much will be the difference between the annual returns from the two firms ?
(i) 1 st firm:
Market value of 1 share = Rs. 120
Nominal value of 1 share = Rs. 100
Dividend = 5%
Income on Rs. 120 = 5% of Rs. 100 = Rs. 5
Income on Rs. 1 = 
= 𝑅𝑠. 0.041
2 nd firm:
Market value of 1 share = Rs. 132
Nominal value of 1 share= Rs. 100
Dividend = 6%
Income on Rs. 132 = 6% of Rs. 100 = Rs.6
Income on Rs. 1 = 
= 𝑅𝑠. 0.045
Then investment in second company is giving better return
(ii)Income on investment of Rs. 26,400 in first firm
= 
× 26,400 = Rs. 1,100
Income on investment of Rs. 26,400 in second firm
= 
× 26,400 = 𝑅𝑠. 1,200
∴ Difference between both returns = Rs. 1,200 – Rs. 1,100
= Rs. 100
(i) 1 st firm:
Market value of 1 share = Rs. 120
Nominal value of 1 share = Rs. 100
Dividend = 5%
Income on Rs. 120 = 5% of Rs. 100 = Rs. 5
Income on Rs. 1 = = 𝑅𝑠. 0.041
2 nd firm:
Market value of 1 share = Rs. 132
Nominal value of 1 share= Rs. 100
Dividend = 6%
Income on Rs. 132 = 6% of Rs. 100 = Rs.6
Income on Rs. 1 = = 𝑅𝑠. 0.045
Then investment in second company is giving better return
(ii)Income on investment of Rs. 26,400 in first firm
= × 26,400 = Rs. 1,100
Income on investment of Rs. 26,400 in second firm
= × 26,400 = 𝑅𝑠. 1,200
∴ Difference between both returns = Rs. 1,200 – Rs. 1,100
= Rs. 100
