Question

Razia buys 200 shares, each of par value ₹ 10 of a company which pays annual dividend of 15% at such a price that she gets 12% on her investment. Find the market value of a share.

Answer 1

Given:

Number of shares = 200 (not needed for this calculation)

Par value = ₹ 10

Dividend rate = 15% of par value

Required return (yield) = 12% on investment

Dividend = 15% of ₹ 10 

= ₹ 1.50

Yield = `("Dividend"/"Market Value")xx100`

`12 = (1.5/"Market Value")xx100`

`"Market Value" = 1.5xx100/100`

= ₹ 12.50