Question

At what price should a 10%, ₹ 25 share be quoted when the money is worth 8%?

Answer 1

Given:

Dividend rate = 10%

Face value (N.V.) = ₹ 25

Required yield (money worth) = 8%

Step-wise calculation:

1. Dividend per share

= 10% of ₹ 25 

= 0.10 × 25

= ₹ 2.50

2. Use the relation

M.V. = Dividend per share ÷ Required yield

3. M.V. = ₹ 2.50 ÷ 0.08

= ₹ 31.25

The 10%, ₹ 25 share should be quoted at ₹ 31.25.