From the following information calculate the value of a share if you want to: (i) buy a small lot of shares; (ii) buy a controlling interest in the company. Year Profit (₹) Capital Employed (₹) Dividend (%) 2015 24,50,00

(i) Buying a small lot of shares: For this purpose dividend yield method is most appropriate for valuation of shares. For calculation of average dividend, weighted average will be more appropriate since dividend rate is rising : Year Rate of dividend (%) Weights Products 2015 15 1 15 2016 18 2 36 2017 20 3 60 2018 25 4 100 10 211 Average dividend = 211/10 = 21.10% Value of a share on the basis of dividend for buying a small lot = (Average dividend rate / Market expectation) × 100 = (21.10/15) × 100 = ₹ 140.67 per share (ii) Buying a controlling interest in the company: For this purpose, total profit will be relevant to determine the value of shares as the shareholders have the capacity to influence the decision of distribution of profit. As the profit is displaying a rising trend, weighted average will be more appropriate for calculation purposes: Year Yield (%) = (Profit/capital employed) × 100 Weights Products 2015 7 1 7 2016 8 2 16 2017 10 3 30 2018 12 4 48 10 101 Average yield = 101/10 = 10.10% Average value per share = (10.10/15) × 100 = ₹ 67.33