(a) Bharti Ltd., has 5000 equity shares of Rs.100 each. These shares are currently
traded at Rs.400 per share in the market. The company has been paying a dividend of
Rs.50 per share for several years. It is expected that same dividend would continue to
be paid in future also.
The company is evaluating a new project costing Rs.2,00,000 and which is expected
to generate cash flow of Rs.65,000 p.a. till perpetuity. Assuming that the funds for
the new project are raised by a right issue of 2:5 and the company would continue to
follow 100% Dividend Payout Ratio, find out
(a) New Dividend per share.
(b) New Market value per share; and
(c) Overall gain to shareholders.
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