CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Advanced Financial Management
Case: Anand Motors Ltd follows a financial policy of keeping a constant dividend payout of 40% of profits. Net profit is ₹50 crore and 10 crore shares are outstanding. Retained earnings fund a project with a return above cost of equity. What is the dividend per share and retained amount?
A 40% payout on ₹50 crore profit gives total dividends of ₹20 crore, or ₹2 per share on 10 crore shares. The remaining ₹30 crore is retained to fund growth projects.
- ADPS ₹2.0; retention ₹30 croreCorrect
- BDPS ₹4.0; retention ₹20 crore
- CDPS ₹2.0; retention ₹20 crore
- DDPS ₹4.0; retention ₹30 crore
Explanation
Dividend = 40% × 50 = ₹20 crore; DPS = 20/10 = ₹2. Retention = 50 − 20 = ₹30 crore. Option with DPS ₹4 divides wrongly by 5 crore shares.
Did you get it right without looking?
One question tells you little. A timed set on Advanced Financial Management shows your real accuracy, how long you take and where you lose marks.
More Advanced Financial Management questions
- Case: Kaveri Foods Ltd (acquirer) plans to buy Malabar Spices Ltd. Malabar's expected free cash flow to firm next year is ₹12 crore, growing…
- Case: Rohan Textiles Ltd has 10 lakh shares, EBIT of ₹30 lakh next year, and ₹100 lakh of 10% debt outstanding. The tax rate is 25%. It uses…
- Case: Kaveri Textiles Ltd expects a dividend of Rs 6 per share next year (D1). Dividends are expected to grow at a constant 5% a year indefi…
- Case: Kaveri Polymers Ltd is evaluating a new moulding line costing Rs 80 lakh, with an expected life of 4 years and nil salvage value. Annu…
- Case: Sundaram Auto Components Ltd, Chennai, wants to net its group's foreign currency flows with its Thai associate through a central treas…
- Case: Sundaram Infra Ltd pays no dividend for the next 3 years. Dividends then begin: Rs 4 at the end of year 4, growing at 6% a year foreve…