Dividend Decisions

Original descriptive practice: 30 saved, 2 at 3 marks, 22 at 5 and 6 at 10. Payout/retention and growth, residual/cash constraints, fixed amount versus fixed payout, Lintner smoothing, Walter/Gordon/MM, DDM timing, bonus/splits and repurchase wealth. Original practice, not ICAI questions or official marking schemes. Native tables scroll on phones. Original preparation is not a live or complete official question bank.

Boundaries: Models are conditional, not live quotes or corporate actions. Gordon requires Ke greater than growth, so full retention in a growth-firm shortcut can be invalid. PDF page 4 proportional tender arithmetic is held. Textbook tax rates, bonus eligibility and next-day-after-declaration ex-date wording are not verified current rules. Ordinary EPS, D0/D1 timing, cash capacity and distinct policy behaviour are explicit.

FM-C08-D001 · 5 marks

A firm reports large annual PAT but faces a plant renewal and overdue customers. Management wants to distribute all PAT to maximise the share price. Required: explain payout-retention choice, value and liquidity limits. (5 marks)
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MarksCreditWorking / case application
1ChoiceOrdinary earnings can be distributed or retained for feasible investment and buffers.
1InvestmentCompare incremental risk-adjusted returns with shareholder opportunity cost; retention not free finance.
1LiquidityPAT is not spendable cash; receivables and dated obligations affect cash capacity.
1ValueMore cash dividend does not universally increase market value; financing costs, risk and investment policy matter.
1FeasibilityCheck current legal/distributable-profit and contractual restrictions before an actual declaration; no automatic full-PAT instruction.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 2

FM-C08-D002 · 3 marks

Ordinary EPS Rs 8, dividend Rs 3.2 per share. Required: payout, retention and retained earnings per share. (3 marks)
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MarksCreditWorking / case application
1Payout3.2/8=40%.
1Retention1-.4=60%.
1Retained8-3.2=Rs 4.8 per share; not a separate cash receipt to shareholders.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 3

FM-C08-D003 · 5 marks

Capital entirely ordinary equity Rs 100 lakh, beginning-period annual earnings rate 20%, retention 40%, constant future return and no new capital. Compute earnings/dividend/retention, next equity and next earnings growth, state limits. (5 marks)
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MarksCreditWorking / case application
1Earnings100 x .20=20 lakh.
1SplitDividend 12, retained 8 lakh.
1CapitalNext opening equity 108 lakh.
1GrowthNext earnings 21.6; growth 8%=b x r=.4 x .2.
1AssumptionStable return/retention and retained capital productive at stated rate; accounting retention does not guarantee operating growth or cash profitability.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 8

FM-C08-D004 · 5 marks

Ordinary EPS over 3 years Rs 6/3/9. Policy A fixed DPS 2; Policy B fixed payout 40%. Compute annual DPS and payout ratios under each, and explain income stability/cash constraints. (5 marks)

Per-share amounts in Rs; total financial amounts in Rs lakh and share counts in lakh shares where stated.

YearEPS
16
23
39
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MarksCreditWorking / case application
1A dividend2/2/2 rupees.
1A payout33.3333%/66.6667%/22.2222%.
1B dividend2.4/1.2/3.6 rupees.
1B payout40% throughout the specified positive-earnings years.
1InterpretationFixed DPS stabilises nominal income, fixed payout fluctuates with earnings. Neither guarantees legally/cash-feasible dividends; name policy by behaviour, not ambiguous labels.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 12

FM-C08-D005 · 5 marks

PAT available to ordinary holders 30 lakh, required project investment 40 lakh, target equity financing 60%, no prior cash allocation or limits. Case allows remaining equity need funded from this PAT. Compute required retained equity, residual dividend and ratio; limits. (5 marks)
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MarksCreditWorking / case application
1Equity need40 x .6=24 lakh.
1Retention24 of PAT 30, assuming actually available cash and feasible target financing.
1Residual30-24=6 lakh.
1Payout6/30=20%.
1LimitResidual policy follows investment/equity funding needs; not a current declaration permission or proof debt 16 is available.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 9

FM-C08-D006 · 5 marks

Ordinary PAT 30 lakh; proposed dividend 18. Cash available now 12; imminent net debt/operating payments 7; minimum cash buffer 3. No new finance available. Compute payout ratio, cash available for dividend, gap and distinguish accounting/other legal limits. (5 marks)
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MarksCreditWorking / case application
1Payout18/30=60%.
1Available cash12-7-3=2 lakh.
1GapProposed 18 exceeds available 2 by 16 lakh.
1MeaningPositive PAT and moderate payout do not establish actual payment capacity.
1Other gatesNo assertion about legally distributable reserves/covenants; verify separately. Cash shortfall requires changed timing/funding/payout, not assumed borrowing.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 11

FM-C08-D007 · 5 marks

Last DPS 2, current EPS 8, target payout 50%, adjustment factor.3. Calculate target DPS, gap, adjustment and new DPS/actual payout; interpret smoothing. (5 marks)
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MarksCreditWorking / case application
1Target8 x .5=4 rupees.
1Gap4-2=2.
1Adjustment.3 x 2=.6.
1New2+.6=2.6; actual payout 2.6/8=32.5%.
1MeaningPartial movement toward target, not immediate target payout. Factor and sustainable earnings are case estimates, not a required corporate action.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 14

FM-C08-D008 · 10 marks

DPS initially 2, target payout 50%, adjustment factor.5, EPS years 1/2/3 =8/4/10. Compute target DPS, actual DPS and actual payout each year, explain path dependence and model limits. (10 marks)

Per-share amounts in Rs; total financial amounts in Rs lakh and share counts in lakh shares where stated.

YearEPSTarget payoutAdjustment
1850%0.5
2450%0.5
31050%0.5
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MarksCreditWorking / case application
1Target 14.
1DPS 12+.5(4-2)=3.
1Payout 13/8=37.5%.
1Target 22.
1DPS 23+.5(2-3)=2.5.
1Payout 22.5/4=62.5%.
1Target 35.
1DPS 32.5+.5(5-2.5)=3.75; payout 37.5%.
1PathEach prior actual DPS becomes next base; actual payout can exceed target during EPS decline.
1LimitsSmoothing describes stipulated behaviour, not legality/liquidity or value guarantee; firm may need to change cash commitments under distress.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 14

FM-C08-D009 · 3 marks

Last DPS 2, EPS 8, target 50%. Compute new DPS at adjustment factors 0 and 1 and describe intermediate factors. (3 marks)
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MarksCreditWorking / case application
1ZeroDPS remains 2.
1OneDPS goes immediately to target 4.
1BetweenFor 0<=factor<=1 new dividend lies between prior 2 and target 4; outside-range factors need explicit rationale, not assumed normal smoothing.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 14

FM-C08-D010 · 5 marks

Walter model ordinary EPS 10, r 15%, Ke 10%, no taxes/frictions and retained-only investment, perpetual constant parameters. Compute prices at DPS 0/5/10 and model optimum, distinguish real choice. (5 marks)
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MarksCreditWorking / case application
1FormulaP=[D+(r/Ke)(E-D)]/Ke.
1D0[0+1.5 x 10]/.1=150.
1D 5[5+1.5 x 5]/.1=125.
1D1010/.1=100.
1Model choiceZero payout highest in this model r>Ke; not a general permission or proof all retained projects actually earn 15%.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 22

FM-C08-D011 · 5 marks

Ordinary EPS 10, r 8%, Ke 10%. Use Walter model at DPS 0/5/10 and explain optimal payout and an omitted constraint. (5 marks)
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MarksCreditWorking / case application
1D0[.8 x 10]/.1=80.
1D 5[5+.8 x 5]/.1=90.
1D1010/.1=100.
1ChoiceFull payout highest when r<Ke on stated constant parameters.
1ConstraintCash, current distributable reserves/covenants and actual investment alternatives still matter; no external legal claim.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 23

FM-C08-D012 · 5 marks

Ordinary EPS 8, r=Ke 12%. Compute prices at DPS 0/4/8; explain indifference and why this does not identify one best practical policy. (5 marks)
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MarksCreditWorking / case application
1D0[0+1 x 8]/.12=66.6667.
1D 4[4+1 x 4]/.12=66.6667.
1D 88/.12=66.6667.
1Algebrar/Ke=1 makes numerator E at any admissible D.
1LimitModel value indifference, not proof shareholders all have same liquidity/tax needs or that one real payout is mandatory.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 23

FM-C08-D013 · 10 marks

PAT 30 lakh, preference dividend 12 lakh, ordinary shares 3 lakh. Walter r 20%, Ke 16%, desired model price 42. Derive ordinary EPS, solve DPS/payout, check endpoint feasible price range, reconcile and explain preference treatment/limits. (10 marks)
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MarksCreditWorking / case application
1Ordinary earnings30-12=18 lakh.
1EPS18/3=Rs 6.
1Formula42=[D+1.25(6-D)]/.16.
1Equation6.72=7.5-.25 D.
1DPSD3.12.
1Payout3.12/6=52%.
1Retention48%, retained EPS 2.88.
1EndpointsD=0 price 46.875; D 6 price 37.5; 42 lies inside model range.
1Check[3.12+1.25 x 2.88]/.16=42.
1LimitPreference deducted from PAT, not tax-deducted again. Parameters and feasible 0<=D<=E stated; not an actual quoted market price or optimal-value recommendation.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 25

FM-C08-D014 · 5 marks

EPS 6, r 20%, Ke 16%; manager demands Walter model price 50 while limiting 0<=D<=6. Solve DPS and assess target feasibility and handling. (5 marks)
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MarksCreditWorking / case application
1Equation50 x.16=7.5-.25 D.
1SolutionD=-2, outside ordinary nonnegative dividend interval.
1RangeFeasible prices 37.5 through 46.875.
1No fictionDo not call negative D an actual cash dividend or change EPS/r silently.
1HandleTarget infeasible under supplied assumptions; revise justified inputs/target or use another properly grounded model. Formula output not authority to act.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 22

FM-C08-D015 · 5 marks

Next ordinary EPS E1=8, r 15%, Ke 12%, retention 40%. Required: growth, D1, model price, convergence and interpretation. (5 marks)
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MarksCreditWorking / case application
1Growthg=.4 x .15=.06.
1D18 x .6=4.8.
1Price4.8/(.12-.06)=80.
1DomainKe>g, positive denominator. E1 is next period EPS, not current EPS automatically.
1LimitConstant returns/retention/cost and perpetual growth are model assumptions, not guaranteed market quote; retained only/all-equity model scope.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 27

FM-C08-D016 · 10 marks

Next EPS 6, r 20%, Ke 16%. For retentions 0/.5/.75/.8/.9 compute g, D1, price or invalid status; derive allowed upper bound and critique zero-payout optimum. (10 marks)

Per-share amounts in Rs; total financial amounts in Rs lakh and share counts in lakh shares where stated.

Retention bE1rKe
0620%16%
0.5620%16%
0.75620%16%
0.8620%16%
0.9620%16%
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MarksCreditWorking / case application
1b 0g 0, D 6, P 37.5.
1b.5g 10%, D3, P 50.
1b.75g 15%, D=1.5, P 150.
1b.8g 16%=Ke; denominator zero, no valid finite Gordon price.
1b.9g 18%>Ke; denominator negative, formula extension not valid price.
1Boundb<Ke/r=.16/.20=.8.
1Growth rankingWithin admissible fixed parameter range price increases with retention.
1No finite optimumAs b approaches.8 from below price unbounded mathematically; not an actual firm price forecast.
1Source holdThe page 27 growth-zero-payout table would require b=1 and g=20%, violating its own Ke>g assumption here. Do not present this as a valid Gordon optimum.
1PracticalFinite projects/changing returns/risk and payout feasibility needed. Could use finite/multistage cash flows with sustainable terminal growth.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 27

FM-C08-D017 · 5 marks

E1=6, r=Ke 12%; calculate prices at b 0/.5/.9. Assess b 1 endpoint and distinguish a limiting value from direct valid formula. (5 marks)
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MarksCreditWorking / case application
1b 06/.12=50.
1b.5D3, g 6%, P3/.06=50.
1b.9D.6, g 10.8%, P.6/.012=50.
1Endpointb 1: D=0 and denominator 0, undefined 0/0, not valid finite 50 by direct substitution.
1BoundaryFor b<1 simplified price 50; limit as b approaches 1 differs from valuing a literal never-payout policy with unmet convergence conditions.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 27

FM-C08-D018 · 5 marks

E1=8, r 8%, Ke 12%. Compute prices at b 0/.5/.75 and model payout choice; compare growth and required return. (5 marks)
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MarksCreditWorking / case application
1b 0g 0, D 8, P 66.6667.
1b.5g 4%, D 4, P 50.
1b.75g 6%, D2, P 33.3333.
1RankingFull payout highest in supplied model when r<Ke.
1LimitsFeasible cash/legal constraints and actual return forecasts remain necessary; model r<Ke not evidence of current corporate viability.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 27

FM-C08-D019 · 5 marks

Last just-paid D0=Rs 3, next-year and perpetual growth 4%, Ke 10%. Calculate D1, ex-dividend P0, forward dividend yield D1/P0, capital yield and total required return. (5 marks)
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MarksCreditWorking / case application
1D13 x 1.04=3.12.
1P03.12/(.10-.04)=52.
1Dividend yield3.12/52=6%.
1Capital yield4% under constant model.
1Total6+4=10%; D0/.06=50 would use wrong period. Price excludes already-paid 3, not automatically a dated market quote.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 29

FM-C08-D020 · 5 marks

A share face value 10 has declared annual dividend 20% of face; just paid D0 therefore 2. Market quote 50, constant growth 3%, Ke 11%. Compute D1/model price/current yield/forward model yield and distinguish bases. (5 marks)
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MarksCreditWorking / case application
1D020% x 10=2, not 20% of market 50.
1D12.06.
1Model price2.06/.08=25.75.
1Current yieldD0/current observed quote=2/50=4%.
1Forward model yield2.06/25.75=8%; quote/model difference not actual trade instruction, forecasts conditional.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 31

FM-C08-D021 · 10 marks

D0 just paid 2. Dividends grow 20% for next 2 years then 5% perpetually from year 3; Ke 12%. Compute D1/D2/D3, terminal P2, each PV and P0; explain terminal timing/double counting/domain. (10 marks)
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MarksCreditWorking / case application
1D12.4.
1D22.88.
1D32.88 x 1.05=3.024.
1P23.024/(.12-.05)=43.2, valued at end year 2 ex-D2.
1PVD12.4/1.12=2.142857.
1PVD 22.88/1.12^2=2.295918.
1PVP 243.2/1.12^2=34.438776.
1P038.877551.
1No duplicateP2 captures D3 onward, not D2 again; discount P2 two years not three.
1DomainTerminal g 5%<Ke 12%; high growth finite only, not assumed perpetuity 20%. Forecast/risk conditions not actual quotes.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 31

FM-C08-D022 · 5 marks

Ke 10%. Policy A constant dividend Rs 3 from end year 1 forever; Policy B first dividend Rs 3 at end year 3 then constant forever. Calculate P0 both and delay discounting; limit. (5 marks)
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MarksCreditWorking / case application
1Immediate perpetuityA 3/.1=30.
1Delayed valueAt end year 2 price 30 just before first year 3 dividend stream.
1P0 B30/1.1^2=24.793388.
1DifferenceDelay reduces value 5.206612 with same future amount and rate.
1LimitZero growth not zero required return; date of first payment controls valuation. No actual payout commitment.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 30

FM-C08-D023 · 5 marks

Under perfect no-tax MM fixed investment model, P0=100, Ke 12%. Compare D1=0 and 10; compute P1 and one existing holders end wealth/discounted wealth and state conditions. (5 marks)
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MarksCreditWorking / case application
1NoDP1=100 x 1.12=112.
1D10P1=112-10=102.
1End wealthPrice plus dividend 112 in either case.
1Present112/1.12=100.
1ConditionsFixed investment/perfect capital markets/no frictions/tax discrimination and compatible financing; changing risks/investment or real taxes can change result.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 17

FM-C08-D024 · 10 marks

n=10,000 existing shares, P0=100, Ke 10%, net ordinary earnings Rs 100,000, new investment Rs 200,000 at year end. Compare DPS 0 and 5. Compute P1/retention/funding/new shares/current equity value by MM formula and original holders wealth; fractional shares allowed in model. (10 marks)

Per-share amounts in Rs; total financial amounts in Rs lakh and share counts in lakh shares where stated.

CaseDPSEarnings RsInvestment Rs
Zero0100000200000
Five5100000200000
Show answer and marking
MarksCreditWorking / case application
1P1 zero110.
1Funding zeroI-E=100000; new shares 100000/110=909.090909.
1P1 five105.
1Dividend total10000 x 5=50000; retained 50000.
1Funding five200000-50000=150000; new shares 1428.571429.
1Value zero[(10000+909.090909)x 110-200000+100000]/1.1=1000000.
1Value five[(10000+1428.571429)x 105-200000+100000]/1.1=1000000.
1Holder wealthOriginal holders nP 1+nD=1100000 in either case at year end; present 1000000.
1No double countNew share cash funds investment gap, not free wealth to existing holders. Equity value formula not equity-plus-debt enterprise value.
1Fractional limitContinuous shares arithmetic only; actual whole-share issue terms, fees/current law need verification. No issue authorised.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 19

FM-C08-D025 · 5 marks

MM model P1=102, funding gap Rs 600,000. Calculate fractional new shares, minimum integer if issue requires whole ordinary shares, actual cash raised/overfunding and limits. (5 marks)
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MarksCreditWorking / case application
1Fraction600000/102=5882.352941.
1WholeCeiling 5883 shares, not nearest 5882 which underfunds.
1Cash5883 x 102=600066.
1Over fund66 rupees needs stated cash handling; not ignore when reconciling exact balances.
1LimitIdeal MM fractional model separate from actual issue mechanics/permissions/market pricing/legal requirements.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 35

FM-C08-D026 · 5 marks

Perfect no-tax/friction model: holder has 100 shares at Rs 50 and wants Rs 500 cash when corporation pays no dividend. Shares divisible as needed but here integers suffice. Required: sell count/remaining value/wealth and why only model claim. (5 marks)
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MarksCreditWorking / case application
1Sell500/50=10 shares.
1Remain90 shares.
1Equity value90 x 50=4500.
1TotalCash 500+shares 4500=5000, same initial 100 x 50.
1BoundaryNo sale instruction. Real fees/taxes/price changes/ownership preferences can matter; selling transfers holder ownership, not issuer new-share creation.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 16

FM-C08-D027 · 5 marks

Model n=1 crore shares/P 200, payout cash 50 crore, net equity value 200 crore before and 150 crore after. Investor 10 shares. Calculate company buyback count/remaining price, pro-rata fractional investor tender/wealth, and address PDF page 4 statement 25% of 10=4. (5 marks)
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MarksCreditWorking / case application
1Company50 crore/200=25 lakh shares, remaining 75 lakh.
1Price150 crore/75 lakh=200.
1Pro rata investor25% of 10=2.5 shares, cash 500, remaining 7.5 shares value 1500.
1Wealth500+1500=2000; four shares sold would be 40% and cash 800, but can still total 2000 if separately specified non-pro-rata tender.
1Source boundaryPage 4 arithmetic 25% of 10=4 is not correct. Actual fractional/integer/tender allocation/legal/tax rules not assumed from ideal example.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 4

FM-C08-D028 · 5 marks

Holder 120 shares at Rs 90, firm shares 1.2 lakh/aggregate equity value 108 lakh. Compare 20% bonus and 3-for-1 split without tax/cost/new cash value effects. Compute holder counts/theoretical prices/wealth and accounting distinction. (5 marks)
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MarksCreditWorking / case application
1BonusNew holder 144 shares; firm 1.44 lakh.
1Bonus price90/1.2=75; wealth 144 x 75=10800.
1SplitHolder 360 shares; firm 3.6 lakh.
1Split price90/3=30; wealth 10800.
1AccountingBonus capitalises qualifying reserves into capital; split divides face value/units without itself capitalising reserves. Nominal redistribution not automatic wealth creation, current eligibility/tax held.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 5

FM-C08-D029 · 5 marks

A draft copies textbook claims STCG 15%/LTCG 10% and ex-dividend immediately next day after declaration for a real share. Required: identify what must be verified and preserve source without pretending currentness. (5 marks)
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MarksCreditWorking / case application
1Tax sourceTextbook page 5 quotes rates; not current dated primary proof.
1Tax parametersAsset/classification, holding period, transaction date, residency/exemptions and surplus relief need current primary rules.
1DatesDeclaration, record date, exchange ex-date and settlement calendar are separate; read issuer/exchange current notice.
1No inferenceDo not make an exact tax/ex-date claim or trade from general chapter shortcut.
1ScopeConceptual payout cases can use explicit no-tax assumptions while current legal/tax facts remain held; no erratum or current rule verified.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 3

FM-C08-D030 · 10 marks

Palm Instruments next ordinary EPS E1=8, Ke 12%, reinvestment r 15%, retention 40%. Last just paid D0=4; management target payout 50%, Lintner factor 0.3. Compare Gordon and Walter prices using stated ordinary E=8 in Walter, next Gordon D1/payout/g, needed constant growth for dividend 4.8 at price 100, dividend-capacity limit and model conflicts. (10 marks)

Per-share amounts in Rs; total financial amounts in Rs lakh and share counts in lakh shares where stated.

InputValue
E 1 Rs8
Ke12%
r15%
b40%
Last D0 Rs4
Lintner target50%
Adjustment0.3
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MarksCreditWorking / case application
1Payout60% from b 40%; D1=4.8.
1Growthg 6%=.4 x.15.
1Gordon4.8/(.12-.06)=80.
1WalterD 4.8 plus( .15/.12)x retained 3.2=8.8; /.12=73.333333.
1TargetEPS 8 x 50%=4.
1LintnerDnew 4+.3(4-4)=4; not automatic Gordon 4.8.
1Price 100 growthWith D1 fixed 4.8, Ke 12%, g=.12-4.8/100=.072=7.2%; do not change D1 simultaneously unnoticed.
1ModelsWalter/Gordon/Lintner different assumptions/questions; not three actual market quotes required to match.
1Retention domainGordon needs b<.12/.15=.8; full retention invalid for perpetual constant g.
1Action limitPAT/EPS or price outputs not dividend cash/legal capacity. No actual declaration, buyback, share issue or trade authorised.

Original indicative capped marking, not official scheme. Equivalent correct work credited without duplication. Model assumptions and dates control; no live quote, tax assurance, corporate action or trade instruction.

Official concept source, PDF page 27