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Dividend Policy Numericals

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SAURABH PANDEY
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110 views1 page

Dividend Policy Numericals

Uploaded by

SAURABH PANDEY
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Q.1 The following information relate to ABC ltd.

Earnings per share Rs 9, Internal Rate of


Return 18%, cost of capital 12%, payout ratio 33.33%. Calculate the market price under the
Walter’s Model.
Q.2 The EPS of a company are Rs 10 and the rate of capitalization (Ke) applicable to the company
is 12%. The company has before it an option of adopting a payment ratio of 25% (or) 50% (or)
75%. Using Walter’s formula of dividend payout, compute the market value of the company’s
share of the productivity of retained earnings (r)
i. 12% ii. 8% iii. 15%.

Q.3 G ltd has invented Rs 500 lakhs in assets. There are 50 lakhs shares outstanding. The par value
per share is Rs 10. It earns a rate of 15% on its investment and has a policy of retaining 50% of
earnings. If the appropriate discount rate of the company is 10%, what is the price of its shares are
using the Gordon’s Model? What will happen to the price of the shares if the company has a
dividend payout ratio of 20% and 80%?
Q.4 If Ke= 11% and E= Rs 15, calculate the stock value of XYZ Ltd. for:
1. r= 12%
2. r= 11%
3. r= 10%
For the various levels of the dividend payout ratios
i. 10%
ii. 20%

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