Question

Mr. Gupta has a choice to invest in ten-rupee shares of two firms at Rs.13 or at Rs.16. If the first firm pays $5\%$ dividend and the second firm pays $6\%$ dividend per annum, find:
i) Which firm is paying better
ii) If Mr. Gupta invests equally in both the firms and the difference between the returns from them is Rs. 30, find how much in all, does he invest?

Answer 1

First Case:
Market value of share = Rs. 13 and
Dividend $=5\%$
$\therefore$ Income on Rs. 13$=\frac{5}{10}$
And income on Re. 1 $=Rs.\left(\frac{5}{130}\right)$
Second Case:
Market value of share = Rs. 16 and
Dividend $=6\%$
$\therefore$Income on Rs. 16$=\frac{6}{10}$
And income on Re. 1 $\left(\frac{6}{160}\right)=\left(\frac{3}{80}\right)$
Therefore, it is clear from both the cases, that the first firm is paying better.