Ramesh buys 150 shares of par value ` 10/- each of a company which pays annual
dividend of 15% at such a price that he receives 10% on his investments. What is the market value of share?
To find the market value of a share, we need to calculate how much Ramesh paid for the shares in order to receive a 10% return on his investment.
Let's break down the information given:
- Ramesh bought 150 shares of par value ₹10/- each.
- The company pays an annual dividend of 15% on the par value of the shares.
- Ramesh wants to receive a 10% return on his investment.
First, let's calculate the annual dividend Ramesh receives from his shares:
Dividend per share = 15% of ₹10 = ₹1.50
Next, let's calculate the total dividend Ramesh receives on his 150 shares:
Total dividend = Dividend per share × Number of shares = ₹1.50 × 150 = ₹225
Since Ramesh receives a 10% return on his investment, we can calculate how much he paid for the shares by dividing the total dividend by the return rate:
Investment = Total dividend / Return rate = ₹225 / 10% = ₹2250
Therefore, the market value of each share is the total investment divided by the number of shares:
Market value per share = Investment / Number of shares = ₹2250 / 150 = ₹15
So, the market value of each share is ₹15.