## Register Now

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Morbi adipiscing gravdio, sit amet suscipit risus ultrices eu. Fusce viverra neque at purus laoreet consequa. Vivamus vulputate posuere nisl quis consequat.

## If the face value of both the shares is same, then which investment out of the following is more profitable? Company A : Dividend 16%, MV = ₹80, Company B : dividend 20%, MV = ₹120.

Print or Save

Here face value for both the shares is same

Let the face value be ₹100

(i) For company A : FV = ₹100 [Assumed]

MV = ₹80

Dividend rate = 16%

∴ Dividend per share =FV × rate

=100 × 16%
= 100 x ${{16} \over 100}$
= ₹16
Rate of return = ${{Dividend} \over MV}$ x 100
=${{16} \over 80}$ x 100
=20%
∴ The rate of return for investment in company A = 20%

(ii) For company B : FV = ₹100 [Assumed]

MV = ₹120

Dividend rate = 20%

∴ Dividend per share =FV × rate

=100 × 20%
=100 x ${{20} \over 100}$
= ₹ 20
Rate of return =  ${{Dividend} \over MV}$ x100

=${{20} \over 120}$ x 100
=${{50} \over 3}$
= ₹16.67
∴ The rate of return for investment in company B = 16.67%

∴ It is obvious that company A is more profitable.

Financial Planning for Math I July 31 , 2018 0 Comments 899 views