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CA Intermediate · Financial Management and Strategic Management · Scope and Objectives of Financial Management

Meera Industries has a share price of ₹150 today. A shareholder who bought one share two years ago for ₹110 received dividends of ₹8 at the end of year 1 and ₹10 at the end of year 2. Ignoring the time value of money and taxes, what is the total shareholder return in rupees and as a percentage of the purchase price (nearest whole per cent) for the two-year holding?

Total return is ₹58, or about 53% of the purchase price. It is the capital gain of ₹40 (150 minus 110) plus dividends of ₹18 (8 plus 10), divided by the original cost of ₹110. Using the current price as the base would be wrong.

  1. A₹58; 53%Correct
  2. B₹40; 36%
  3. C₹18; 16%
  4. D₹58; 39%

Explanation

Capital gain = 150 − 110 = ₹40. Dividends = 8 + 10 = ₹18. Total return = 40 + 18 = ₹58. Percentage = 58/110 = 52.7%, i.e. 53%. Option ₹40 ignores dividends, ₹18 ignores capital gain, and 39% divides by ₹150 (wrong base).

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