Question

A company pays a dividend of 15% on its Rs 100 shares from which income tax at the rate of 20% is deducted. Find :
(1) The net annual income of Gopal who owns 7,200 shares of this company
(2) The sum invested by Ramesh when the shares of this company are bought by him at 20% premium and the gain required by him(after deduction of income tax) is Rs 9,000

Answer 1

1) Let the number of shares be x

Annual income = Rate of dividend x Nominal Value x Number of shares

`= 15/100 xx100 xx x`

= 15x ......(1)

Since the income tax is given to be 20%  which is deducted

`5x - 20% of 15x = 15x - 20/100 (15x) = 15x - 3x = 12x`

Thus the net annual income of Gopal who owns 7200 shares of this company

= 12x

= 12(7200)

= Rs 86400

2) Let the sum invested by him be Rs S

N.V of each share = Rs 100

M.V of each share = Rs 100 + 20% of Rs 100= Rs 120

Number of each share = Rs S/120

Dividend on each share = Rs 15% of Rs 100 = Rs 15

Total dividend = `Rs 15 xx S/120 =Rs S/8`

Since the income tax is given to be 20% which is deducted

The gain = `S/8 - 20/10 (S/8) = S/8 - S/40 = S/10`

Given the gain required by him is Rs 9000

So, `S/10 = Rs 9000`

=> S = Rs 90000

Hence the sum invested by Ramesh us Rs 90000