From the following information, calculate the value of shares of ₹10: Year Capital employed (₹) Profit (₹) Dividend Weight 2011 10,00,000 80,000 12% 1 2012 16,00,000 1,60,000 14% 2 2013 20,00,000 2,20,000 16% 3 2014 25,0
CS Executive · Company Accounts & Auditing Practices · PYQS · June 2016
From the following information, calculate the value of shares of ₹10: Year Capital employed (₹) Profit (₹) Dividend Weight 2011 10,00,000 80,000 12% 1 2012 16,00,000 1,60,000 14% 2 2013 20,00,000 2,20,000 16% 3 2014 25,00,000 3,75,000 18% 4 The market expectation being 10%. Use weighted average for calculation. (a) On dividend basis; and (b) On return on capital employed basis.
Answer & Explanation:
Answer 2A(i) Calculation of value of shares (a) on dividend basis Year Dividend Rate Weight Product 2011 12 1 12 2012 14 2 28 2013 16 3 48 2014 18 4 72 Total 10 160 160/10=16 Value of shares = (16/10) × 10 = 16 (b) Return on capital employed basis Year ROCE (%) Weight Product 2011 8 1 8 2012 10 2 20 2013 11 3 33 2014 15 4 60 Total 10 121 121/10 = 12.10 Value of shares = (12.1/10) × 10 = 12.10
Topics: Valuation of Shares
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