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  • Fin Mang Ass 6

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    ekta gudade
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    X Ltd has 10 lakh shares outstanding with current EPS of Rs. 15 and P/E ratio of 10. The appropriate industry P/E ratio is 8.35 and expected EPS for the next year is Rs. 20. The company has an investment budget of Rs. 4 crores. The board has recommended a dividend of Rs. 8 per share that may or may not be declared. Calculations must be shown to prove the market value of shares will remain the same whether dividends are distributed or not.

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    FIN MANG ASS 6

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    X Ltd has 10 lakh shares outstanding with current EPS of Rs. 15 and P/E ratio of 10. The appropriate industry P/E ratio is 8.35 and expected EPS for the next year is Rs. 20. The company has an investment budget of Rs. 4 crores. The board has recommended a dividend of Rs. 8 per share that may or may not be declared. Calculations must be shown to prove the market value of shares will remain the same whether dividends are distributed or not.

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    30 views1 page

    Fin Mang Ass 6

    Uploaded by

    ekta gudade
    X Ltd has 10 lakh shares outstanding with current EPS of Rs. 15 and P/E ratio of 10. The appropriate industry P/E ratio is 8.35 and expected EPS for the next year is Rs. 20. The company has an investment budget of Rs. 4 crores. The board has recommended a dividend of Rs. 8 per share that may or may not be declared. Calculations must be shown to prove the market value of shares will remain the same whether dividends are distributed or not.

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    Download as TXT, PDF, TXT or read online from Scribd
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    Case Study

    X Ltd. has 10 lakhs equity shares outstanding at the beginning of the accounting
    year 2016. The appropriate P/E ratio for the industry in which D Ltd. is 8.35. The
    earnings per share is Rs. 15 in the last twelve months and current P/E ratio for
    the company is 10. The EPS is expected to be Rs. 20 at the end of the accounting
    year and the company has an investment budget of Rs. 4 crores. Based on M-M
    approach calculate the market price of share of the company.

    (a) When the Board of Directors of the company has recommended Rs. 8 per share as
    dividend which is (i) declared, and (ii) not declared.

    (b) How many new shares are to be issued by the company at the end of the
    accounting year when (i) the above dividends are distributed, and (ii) dividends
    are not distributed.

    (c) Show that the market value of the shares of the company at the end of the
    accounting year will remain the same whether dividends are distributed or not
    declared.

    a- 150000000

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