Question

A company with 10,000 shares of nominal value of Rs. 100 declares an annual dividend of 8% to the share-holders.

1. Calculate the total amount of dividend paid by the company.
2. Ramesh had bought 90 shares of the company at Rs. 150 per share. Calculate the dividend he receives and the percentage of return on his investment.

Answer 1

i. Number of shares = 10,000

Nominal value of each share = Rs. 100

Rate of annual dividend = 8%

Total face value of 10,000 shares

= Rs. 100 × 10,000

= Rs. 10,00,000

And amount of dividend

= Rs. `(10,00,000 xx 8)/(100)`

= Rs. 80,000

ii. Number of shares = 90

Face value of each share = Rs. 150

Total face value of 90 shades

= Rs. 100 × 90

= Rs. 9,000

∴ Amount of dividend

= Rs. `(9,000 xx 8)/(100)`

= Rs. 720

Market value of 90 shares

= 90 × 150

= Rs. 13,500

∴ Rate of interest

= `(720 xx 100)/(13,500)`

= `(16)/(3)`

= `5(1)/(3)%`