an investor is looking for 4 year investment.the share of skylark company is selling for rs 75.they have plans to pay a divedend of rs 7.50 per share each at the end of first and second yaears and rs 9 and rs 15 respectively at the end of third and fourth years.if the investors capitilization rate is 12 percent and the share price at the end of fourth year is rs 70,what is the value of share.what it be a desirable investment.

To determine the value of the share and assess if it is a desirable investment, we can use the Dividend Discount Model (DDM). The DDM calculates the present value of all expected future dividends and the expected sale price of the share at the end of the investment period.

Let's calculate the value of the share step by step:

Step 1: Calculate the present value of each dividend at the end of each year using the formula:

PV = Dividend / (1 + r)^n

PV stands for present value, Dividend is the expected dividend, r is the capitalization rate, and n is the number of years.

For the given dividends:
- End of year 1 dividend: Rs 7.5
- End of year 2 dividend: Rs 7.5
- End of year 3 dividend: Rs 9
- End of year 4 dividend: Rs 15

Using a capitalization rate of 12% (0.12) and a total of 4 years (n = 4):

PV1 = 7.5 / (1 + 0.12)^1
PV2 = 7.5 / (1 + 0.12)^2
PV3 = 9 / (1 + 0.12)^3
PV4 = 15 / (1 + 0.12)^4

Step 2: Calculate the present value of the expected share price at the end of the fourth year:

PV4_Price = 70 / (1 + 0.12)^4

Step 3: Calculate the sum of all present values:

Total PV = PV1 + PV2 + PV3 + PV4 + PV4_Price

Step 4: Determine the value of the share, which is the total present value:

Value of Share = Total PV

Now, let's perform the calculations:

PV1 = 7.5 / (1 + 0.12)^1
= 7.5 / 1.12
= 6.70 (rounded to two decimal places)

PV2 = 7.5 / (1 + 0.12)^2
= 7.5 / 1.2544
= 5.98 (rounded to two decimal places)

PV3 = 9 / (1 + 0.12)^3
= 9 / 1.404928
= 6.40 (rounded to two decimal places)

PV4 = 15 / (1 + 0.12)^4
= 15 / 1.57352
= 9.54 (rounded to two decimal places)

PV4_Price = 70 / (1 + 0.12)^4
= 70 / 1.57352
= 44.50 (rounded to two decimal places)

Total PV = PV1 + PV2 + PV3 + PV4 + PV4_Price
= 6.70 + 5.98 + 6.40 + 9.54 + 44.50
= 73.12 (rounded to two decimal places)

Therefore, the value of the share is Rs 73.12.

To determine if it is a desirable investment, we need to compare the calculated value of the share (Rs 73.12) to the current market price (Rs 75). If the calculated value is higher than the market price, it may be considered a desirable investment. In this case, the value of the share is lower than the market price, so it may not be a desirable investment.