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Maharashtra State BoardSSC (English Medium) 10th Standard

Market value of shares and dividend declared by the two companies is given below. Face Value is same and it is Rs 100 for both the shares. Investment in which company is more profitable ?(1) Company

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Question

Market value of shares and dividend declared by the two companies is given below. Face Value is same and it is Rs. 100 for both the shares. Investment in which company is more profitable ?
(1) Company A - Rs 132, 12%
(2) Company B - Rs 144, 16%

Sum
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Solution

For company A:

The face value of each share is Rs. 100.

Market value of share of company A = Rs. 132

Rate of dividend = 12%

Dividend = 12% of FV = 12% of Rs. 100 = `(12)/(100) × 100` = ₹ 12.

Rate of return = `"Dividend"/"Sum invested" × 100% = (12)/(132) × 100%` = 9.09%

For company B:

The face value of each share is Rs. 100.

Market value of share of company B = Rs. 144

Rate of dividend = 16%

Dividend = 16% of FV = 16% of Rs. 100 =`(16)/(100) × 100` = ₹ 16.

Rate of return = `"Dividend"/"Sum invested" × 100% = (16)/(144) × 100%` = 11.11%

∴ Rate of return from company B > Rate of return from company A

Thus, the investment in company B is more profitable.

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Chapter 4: Financial Planning - Problem Set 4B [Page 112]

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