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ITC Ltd. Having a shares quoted in the major shock exchanges.

Its share current market price after dividend distributed at the rate of 21% p.a. having a paid up share capital of Rs. 50 lakhs of Rs. 10 each. Annual growth rate is dividend expected is 3%. The expected rate of return on equity capital is 6%. Calculation Step 1: Dividend Distributed During the year Step 2: Value per Share (using formula P0)

16 83192307.69 166.38 No.Calculation Step 1: Dividend Distributed During the year Dividend Distributed During the Year (D0) Paid up capital X Rate of Dividend Paid 10500000 Step 2: Value per Share (using formula P0) g= 0.03 Ke= 0. of Equity Shares = 5000000 .

03 Ke= 0.g= 0.16 ty Shares = 5000000/10 .

Compute the price of the company’s quoted share as per Walter's model if it can earn a return of (A). 60 Rs.90 100% of Market Price Per Share (When Ra= 10%) Rs.80 n of Market Price Per Share (When Ra= 5%) Rs. 8 and the rate of capitalization applicable is 10%. (2) 75% (3) 100% dividend payout ratio. 1 10% and (c) 5% on its retained earnings.80 Rs.The earnings per share of a company is Rs.100 50% 75% (a). The co has before it an option of adopting (1) 50%. 70 . Calculation of Market Price Per Share (When Ra= 15%) Rs. Compute the Market Price of Company's Share by Applying Walter's Formula Step 1: Calculate the Market Price per Share based on Different IRRs and Dividend Payout Rati D/P Ratio Rs.

rnings. (b). 15%.zation applicable is 10%. Compute the market t can earn a return of (A).10) IRRs and Dividend Payout Ratios 100% Rs. plying Walter's Formula P= Market Price per Share Ra= Internal Rate of Return or Investment E= Earnings per Share (Rs.8) D= Dividend Per Share Rc= Cost of Capital (0. 80 .80 hen Ra= 15%) Rs. The company nd payout ratio.80 Rs.

Compute the Market Price of Company's Share by Applying Walter's Formula Step 1: Calculate the Market Price per Share based on Different IRRs and Dividend Payout Ratios D/P Ratio 50% 75% (a). Calculation of Market Price Per Share (When Ra= 10%) 80 80 (a). Calculation of Market Price Per Share (When Ra= 5%) 60 70 100% 80 80 80 . Calculation of Market Price Per Share (When Ra= 15%) 100 90 (a).

Formula P= Market Price per Share Ra= Internal Rate of Return or Investment E= Earnings per Share (Rs.10) end Payout Ratios 100% 80 80 80 .8) D= Dividend Per Share Rc= Cost of Capital (0.

100 each. The firm contemplating declaration of a dividend of Rs. has net income of Rs. 6 per share selling at Rs.Rotomac Ltd. 6 per share at the end of the current fiscal year which ha just began.100 each. Question 1: What will be the price of shares at the end of the year if dividend is not declared ? Question 2: What will be the price if dividend is declared? Question 3: Assuming that the firm pays dividend.00. The firm is contemplating delcation of a dividend of Rs. how many new shares must be issued? . 20 lakhs during the period. Has capitalization rate of 10%. 10 Lakhs and makes new investments of Rs. It currently has 1.000 shares selling at Rs. Answer the following questions based on MM Model and assume there is no tax.

ing at Rs.100 each. The firm is he current fiscal year which has sume there is no tax.100 each. vidend is not declared ? s.shares selling at Rs. 10 Lakhs and makes new must be issued? .