Question

Market value of shares and dividend declared by the two companies is given. Face value is same and it is Rupees 100. Investment in which compnay is more profitable ?
(i) Company A - Rupees 136, 14%
(ii) Company B - Rupees 144, 15%

Answer 1

Correct Answer - From (1) and (2) , the investment in company B is more profitable.
Let the investment in both the companies be `Rupees 136 xx 144`
Company A `:` MV Rupees 136, Dividend 14%
`:.` dividend is Rupees 14 on one share of FV Rupees 100
`:.` dividend from company A `= ( "total investment" xx "dividend per share")/("MV of 1 share")`
`= (136 xx 144 xx 14)/( 136) = Rupees 2016` ....(1)
Company B `:` MV Rupees 144 , Dividend 15 %
`:.` dividend is Rupees 15 on one share of FV Rupees 100
`:.` dividend from company B `=("total investment" xx "dividend per share")/("MV of 1 share")`
`( 136 xx 144 xx 15)/( 144) = Rupees" "2040` ...(2)