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Mr. Gupta Has a Choice to Invest in Ten-rupee Shares of Two Firm 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 Pay - Mathematics

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Sum

Mr. Gupta has a choice to invest in ten-rupee shares of two firm 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.

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Solution

i) 1st firm
Nominal value of 1 share = Rs. 10

Market value of 1 share = Rs. 13
Dividend% = 5%
Dividend = 5% of Rs. 10 = Rs. 0.50

∴ Income% = `("Income")/("Investment")`×100%

                   = `0.50/13` ×100% = 3.846%

2nd firm

Nominal value of 1 share = Rs. 10

Market value of 1 share = Rs. 16
Dividend% = 6%
Dividend = 6% of Rs. 10 = Rs. 0.60

∴ Income% =`("Income")/("Investment")` ×100%

                   = `0.60/16` ×100% = 3.75%
 Then first firm is paying better than second firm.

(ii)
Let money invested in each firm= Rs y
For 1st firm

∴ No of shares purchased = `"y"/13`shares
Total dividend = Rs. 0.50 × `"y"/13` = Rs, `"y"/26`  

For 2nd firm:
∴ No of shares purchased = `"y"/16` shares 
Total dividend = Rs. 0.60 × `"y"/16`  = Rs `(3"y")/80`
Given – difference of both dividend = Rs. 30

⇒ `"y" / 26 - (3"y")/80 = Rs.30` 
⇒  Rs. `"y"/ 1040` = 30
⇒ y = Rs. 30 × 1040 = Rs. 31,200
    Total money invested in both firms = Rs. 31,200 × 2
= Rs. 62,400 

Concept: Shares and Dividends Examples
  Is there an error in this question or solution?
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APPEARS IN

Selina Concise Maths Class 10 ICSE
Chapter 3 Shares and Dividend
Exercise 3 (C) | Q 8 | Page 37

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