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Mr. gupta has choice to invest ten rupee shares of two firms at rs. 13 or rs. 16. If first co. pays 5% dividend and secound pays 6% div. then find which co. is paying better and why??
 

Asked by rishirajsalian 11th September 2015, 4:40 PM
Answered by Expert
Answer:

 

Hi Rishirajsalian

 

Suppose space Mr. space Gupta space has space invested space Rs. space 100 space in space each space firm.  For space firm space straight A space No. space of space shares space at space Rs. space 13 space equals space 100 over 13 Divident space on space one space share space equals space 5 percent sign space of space straight N. straight V space equals space 5 over 100 cross times 10 equals 1 half Total space Divident space for space firm space straight A space equals space 100 over 13 cross times 1 half equals 100 over 26 almost equal to 3.85  For space firm space straight B space No. space of space shares space at space Rs. space 16 space equals space 100 over 16 Divident space on space one space share space equals space 6 percent sign space of space straight N. straight V space equals space 6 over 100 cross times 10 equals 3 over 5 Total space Divident space for space firm space straight B space equals space 100 over 16 cross times 3 over 5 equals 300 over 80 equals 3.75  Hence space firm space straight A space is space pa y i ng space better.

Answered by Expert 14th September 2015, 1:00 PM
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