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

Meera Industries has earnings of Rs 12 crore and 2 crore equity shares. Its policy is to pay out 40% of earnings as dividend. If the market price rises from Rs 120 to Rs 135 over the year and the dividend per share is as per this policy, what is the shareholder's total percentage return for the year (dividend yield plus capital gain) on the opening price?

The total return is 14.5 percent, calculated as dividend of Rs 2.40 plus capital gain of Rs 15 divided by the opening price of Rs 120. This option set does not contain it, so the question should not be used.

  1. A17.5%Correct
  2. B12.5%
  3. C15.0%
  4. D20.0%

Explanation

EPS = 12 crore / 2 crore = Rs 6. DPS = 40% of 6 = Rs 2.40. Capital gain = 135 - 120 = Rs 15. Total return = (2.40 + 15) / 120 = 17.4/120 = 14.5%. Check against options: none equals 14.5%, so recompute needed data.

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