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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%
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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Complete the following table by writting suitable numbers and words.
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| (2) | ... | premium Rs 500 | Rs 575 |
| (3) | Rs 10 | ... | Rs 5 |
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