CA Intermediate · Financial Management and Strategic Management · Scope and Objectives of Financial Management
Sundaram Textiles Ltd has 4,00,000 equity shares outstanding. Its market price per share is ₹150 and the firm has no preference capital. The market value of its debt is ₹2,00,00,000. Shareholders' wealth as per the wealth maximisation objective is measured by:
Shareholders' wealth is the market value of equity, which is 4,00,000 shares multiplied by ₹150, giving ₹6,00,00,000. Debt of ₹2 crore belongs to lenders, so adding it would give total firm value of ₹8 crore, not shareholders' wealth.
- A₹6,00,00,000Correct
- B₹8,00,00,000
- C₹2,00,00,000
- D₹3,50,00,000
Explanation
Shareholders' wealth equals number of shares times market price: 4,00,000 × ₹150 = ₹6,00,00,000. Adding debt (₹2 crore) gives ₹8 crore, which is total firm value, not shareholders' wealth. Debt belongs to lenders.
Did you get it right without looking?
One question tells you little. A timed set on Scope and Objectives of Financial Management shows your real accuracy, how long you take and where you lose marks.
More Scope and Objectives of Financial Management questions
- Which of the following best describes the agency problem between shareholders and managers, and a commonly used remedy as per the financial …
- Which of the following best describes the agency problem between shareholders and managers in a company?
- Ramesh Industries Ltd. has 5,00,000 equity shares. It is considering a project that will increase the annual EPS from ₹12 to ₹14 but will ra…
- Rohan Foods Ltd. has 4,00,000 equity shares outstanding. Its net present value of all future cash flows to equity is estimated at ₹60,00,000…
- Under the agency problem in a company, the conflict between majority shareholders and minority shareholders is best illustrated by which sit…
- Under the agency relationship between shareholders and managers, which of the following is an example of an agency cost incurred by sharehol…