NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)
A company with 10 crore shares trades at Rs 250. It announces a bonus issue in the ratio 1:4 (one bonus share for every four held). Ignoring other factors, what is the theoretical ex-bonus price and the new number of shares?
The ex-bonus price is Rs 200 and shares become 12.5 crore. A 1:4 bonus turns every 4 shares into 5, so total market value of Rs 2,500 crore is spread across 12.5 crore shares, giving Rs 200 each.
- ARs 200; 12.5 crore sharesCorrect
- BRs 187.50; 12.5 crore shares
- CRs 200; 14 crore shares
- DRs 250; 12.5 crore shares
Explanation
Each 4 shares become 5. New shares = 10 x 5/4 = 12.5 crore. Market cap is unchanged at Rs 2,500 crore, so price = 2,500/12.5 = Rs 200. Rs 187.50 wrongly uses a 1:3 type adjustment; 14 crore uses a wrong ratio; Rs 250 ignores dilution.
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