The present share capital of A Ltd. consists of 1000 shares selling at Rs.100 each. The...

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The present share capital of A Ltd. consists of 1000 shares selling at Rs.100 each. The company is contemplating a dividend of Rs.10 per share at the end of the current financial year. The company belongs to a risk class for which appropriate capitalization rate is 20%. The company expects to have a net income of rs.25,000. What will be the price of the share at the end of the year if (i) dividend is not declared, and (ii) a dividend is declared. Presuming that the company pays the dividend and has /to make new investment of Rs.48,000 in the coming period, how many new shares be issued to finance the investment program? You are required to use the MM model for this purpose. The present share capital of A Ltd. consists of 1000 shares selling at Rs.100 each. The company is contemplating a dividend of Rs.10 per share at the end of the current financial year. The company belongs to a risk class for which appropriate capitalization rate is 20%. The company expects to have a net income of rs.25,000. What will be the price of the share at the end of the year if (i) dividend is not declared, and (ii) a dividend is declared. Presuming that the company pays the dividend and has /to make new investment of Rs.48,000 in the coming period, how many new shares be issued to finance the investment program? You are required to use the MM model for this purpose.

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The question asks two things What the price of the share would be at the end of the year if a dividend is not declared a dividend is declared Assuming ... View the full answer