A man acquires Rs. 20 shares paying a 9% dividend, aiming for a 12% return on capital. What is the market value per share:_________?
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Answer: B. 15
Explanation
A twenty rupee share paying a nine percent dividend yields an annual return of one rupee eighty per share. To achieve a twelve percent return on capital, the market value must equal the dividend divided by the target rate. Dividing one point eighty by zero point twelve results in a required market value of fifteen rupees. Stock dividend yields are calculated as a percentage of the face value of the corporate share. Market value must adjust relative to face value to ensure investors achieve their desired percentage return. Financial return formulas link annual dividend payouts directly to prevailing market share prices.
Option A underestimates the required market value based on an incorrect return calculation. Option C overestimates the market value because it fails to adjust for the twelve percent yield target. Option D equals the face value of the share rather than the adjusted market price.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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