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Capital of x Ltd is 800000/- , distribute the dividend 50% , annual profit, 200000/- ,Normal rate of return 10% p. a. Face value 100/- value per share will be?
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Capital of x Ltd is 800000/- , distribute the dividend 50% , annual pr...
Calculation of Value per Share


  • Capital of X Ltd = 800000/-

  • Annual Profit = 200000/-

  • Dividend to be distributed = 50% of Profit = 100000/-

  • Retained earnings = 100000/-

  • Normal Rate of Return = 10% p.a.

  • Face Value = 100/-



Calculation of Normal Rate of Return


  • Normal Rate of Return = Annual Profit / Capital * 100

  • Normal Rate of Return = 200000 / 800000 * 100

  • Normal Rate of Return = 25%



Calculation of Market Value per Share


  • Market Value per Share = (Dividend / Normal Rate of Return) + Face Value

  • Market Value per Share = (100000 / 25%) + 100

  • Market Value per Share = 400000 + 100 = 4000



Conclusion

The value per share of X Ltd will be 4000/-.

This calculation is based on the assumption that the market is willing to pay a price that reflects the company's earnings and its ability to generate returns for shareholders. However, other factors such as market conditions, competition, and economic trends can also affect the value per share.
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Capital of x Ltd is 800000/- , distribute the dividend 50% , annual profit, 200000/- ,Normal rate of return 10% p. a. Face value 100/- value per share will be?
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