CA Intermediate · Financial Management and Strategic Management · Scope and Objectives of Financial Management
Sharma Textiles Ltd has 2,00,000 equity shares outstanding. If a project is accepted, the present value of its cash inflows is Rs 58,00,000 and the initial outlay is Rs 50,00,000. Assuming no other effect, by how much would the project be expected to increase the wealth of each shareholder per share?
The increase in wealth is Rs 4 per share. The project's net present value is Rs 58,00,000 minus Rs 50,00,000, which is Rs 8,00,000, and dividing this by 2,00,000 shares gives Rs 4 per share.
- ARs 4Correct
- BRs 25
- CRs 29
- DRs 8
Explanation
Net present value = 58,00,000 - 50,00,000 = Rs 8,00,000. Per share = 8,00,000 / 2,00,000 = Rs 4. Rs 29 wrongly uses the PV of inflows per share and Rs 25 uses the outlay per share, neither being net gain.
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