Dividend Decisions

Amounts are Rs lakh and ordinary share counts are lakh shares unless stated otherwise. 30 original practice MCQs, 2 marks each. Practice and separate-test stems differ. Standalone drills across the chapter, with a separate case-based test pack.

Original practice, not official ICAI questions or suggested answers. Scores are temporary and not synced to Study Hub. Contract/current-rule/accounting/tax boundaries are included in the review pack.

Not scored yet.

FM-C08-P001 · 2 marks

Ordinary EPS 8, DPS 3.2 rupees. Payout ratio?

A. 40%. B. 60% retention. C. 250%. D. 3.2%.

Explanation

Correct answer A: 40%.

3.2/8.

FM-C08-P002 · 2 marks

Same EPS 8/DPS 3.2. Retained EPS?

A. Rs 11.2. B. Rs 8. C. Rs 3.2. D. Rs 4.8.

Explanation

Correct answer D: Rs 4.8.

E-D.

FM-C08-P003 · 2 marks

Retention 40%, constant reinvestment return 20%. Model growth?

A. 8%. B. 20%. C. 12%. D. 40%.

Explanation

Correct answer A: 8%.

b x r, assuming productive retention and stable parameters.

FM-C08-P004 · 2 marks

EPS 6/3/9 and fixed DPS 2. Second-year payout ratio?

A. 40%. B. 33.3333%. C. 66.6667%. D. 22.2222%.

Explanation

Correct answer C: 66.6667%.

2/3; fixed DPS is not a fixed payout ratio.

FM-C08-P005 · 2 marks

EPS 6/3/9, payout 40%. Dividends?

A. 6/3/9 full payout. B. 3.6/1.8/5.4 retention mistaken for payout. C. 2.4/1.2/3.6 rupees. D. 2/2/2 fixed amount.

Explanation

Correct answer C: 2.4/1.2/3.6 rupees.

Multiply each EPS by.4.

FM-C08-P006 · 2 marks

Ordinary PAT 30, investment 40, target equity financing 60%, case cash available. Residual dividend?

A. 16 lakh debt share. B. 30 lakh ignoring investment. C. 6 lakh. D. 24 lakh retained equity need.

Explanation

Correct answer C: 6 lakh.

30-40 x.6.

FM-C08-P007 · 2 marks

Cash 12, dated net payments 7, buffer 3 lakh. Available dividend cash?

A. 9 lakh ignoring payments. B. 5 lakh ignoring buffer. C. 12 lakh ignoring commitments. D. 2 lakh.

Explanation

Correct answer D: 2 lakh.

12-7-3; not a legal distributable-profit verdict.

FM-C08-P008 · 2 marks

Prior DPS 2, EPS 8, target 50%, factor.3. New DPS?

A. Rs 3.2. B. Rs 2.6. C. Rs 4 target without smoothing. D. Rs.6 adjustment only.

Explanation

Correct answer B: Rs 2.6.

2+.3(4-2).

FM-C08-P009 · 2 marks

Same new DPS 2.6/EPS 8. Actual payout?

A. 67.5% payout. B. 32.5%. C. 30% adjustment factor. D. 50% target.

Explanation

Correct answer B: 32.5%.

2.6/8.

FM-C08-P010 · 2 marks

Prior DPS 2, target DPS 4, adjustment factor 0. New DPS?

A. Rs 0. B. Rs 2 unchanged. C. Rs 6. D. Rs 4 immediately.

Explanation

Correct answer B: Rs 2 unchanged.

No adjustment toward target.

FM-C08-P011 · 2 marks

EPS 10, r 15%, Ke 10%, DPS 0. Walter price?

A. Rs 125 half payout price. B. Rs 15. C. Rs 150. D. Rs 100 full payout price.

Explanation

Correct answer C: Rs 150.

[0+1.5 x 10]/.1.

FM-C08-P012 · 2 marks

Same EPS 10/r 15%/Ke 10%, DPS 5. Price?

A. Rs 125. B. Rs 150 zero payout. C. Rs 50 dividend only. D. Rs 100 full payout.

Explanation

Correct answer A: Rs 125.

[5+1.5 x 5]/.1.

FM-C08-P013 · 2 marks

EPS 10, r 8%, Ke 10%. Model optimum payout?

A. 0%, price 80 is best. B. Always 50% independent of rates. C. 100%, price 100 under model. D. 50%, price 90 is best.

Explanation

Correct answer C: 100%, price 100 under model.

r<Ke: payout increases stipulated model value, not actual action authority.

FM-C08-P014 · 2 marks

EPS 8, r=Ke 12%. At DPS 4 price?

A. Rs 100. B. Rs 33.3333 dividend alone. C. Undefined for every dividend. D. Rs 66.6667, same as other admissible payouts.

Explanation

Correct answer D: Rs 66.6667, same as other admissible payouts.

r/Ke 1 makes numerator EPS 8.

FM-C08-P015 · 2 marks

PAT 30, preference dividend 12 lakh, ordinary shares 3 lakh. Ordinary EPS?

A. Rs 6. B. Rs 4 preference per share. C. Rs 10 ignores preference. D. Rs 14.

Explanation

Correct answer A: Rs 6.

(30-12)/3.

FM-C08-P016 · 2 marks

EPS 6, r 20%, Ke 16%, target price 42. DPS/payout?

A. Rs 3.12 and 52%. B. Rs 2.88 and 48% retention. C. Negative Rs 2. D. Rs 6 and 100%.

Explanation

Correct answer A: Rs 3.12 and 52%.

42 x.16=7.5-.25 D.

FM-C08-P017 · 2 marks

Same Walter EPS 6/r 20%/Ke 16%, target price 50, 0<=D<=6. What is supported?

A. Ignore target and alter EPS without saying. B. Required D=-2 is infeasible in specified dividend interval. C. Price 50 guaranteed by zero payout. D. Declare negative dividend as ordinary payout.

Explanation

Correct answer B: Required D=-2 is infeasible in specified dividend interval.

Feasible model price range 37.5 to 46.875.

FM-C08-P018 · 2 marks

E1=8, r 15%, b 40%, Ke 12%. Model growth and D1?

A. 6% and Rs 4.8. B. 40% and Rs 4.8. C. 8% and Rs 3.2. D. 15% and Rs 8.

Explanation

Correct answer A: 6% and Rs 4.8.

g=br; D1=E1(1-b).

FM-C08-P019 · 2 marks

Same E1=8, r 15%, b 40%, Ke 12%. Price?

A. Rs 40. B. Rs 73.3333 Walter model. C. Rs 80. D. Rs 66.6667 full payout model.

Explanation

Correct answer C: Rs 80.

4.8/(.12-.06).

FM-C08-P020 · 2 marks

r 20%, Ke 16%. Constant Gordon retention must satisfy what?

A. Only b=1 required by model growth label. B. b<.8, besides other model assumptions. C. b>.8 required. D. Any b up to 1 always valid.

Explanation

Correct answer B: b<.8, besides other model assumptions.

Ke>br; at.8 denominator zero.

FM-C08-P021 · 2 marks

E1=6, r 20%, Ke 16%, b.9. Formula denominator is-.02. Best interpretation?

A. Infinite positive price by rule. B. Outside convergent constant-growth model, not a valid negative share price. C. A guaranteed negative market price. D. Always accept full retention.

Explanation

Correct answer B: Outside convergent constant-growth model, not a valid negative share price.

g 18% exceeds Ke 16%; use sustainable finite/multistage assumptions if justified.

FM-C08-P022 · 2 marks

E1=6, r=Ke 12%, b.5. Price?

A. Undefined at every b. B. Rs 100. C. Rs 25. D. Rs 50.

Explanation

Correct answer D: Rs 50.

D=3 divided by (.12-.06).

FM-C08-P023 · 2 marks

Just-paid D0=3, g 4%, Ke 10%. Ex-dividend model P0?

A. Rs 50 using D0 instead ofD1. B. Rs 52. C. Rs 30 no-growth shortcut. D. Rs 55 adding paid dividend without date basis.

Explanation

Correct answer B: Rs 52.

D1=3.12; divide.06.

FM-C08-P024 · 2 marks

Face 10, annual dividend 20% of face just paid. D0?

A. Rs 20. B. Rs.2. C. Rs 10 at market 50. D. Rs 2.

Explanation

Correct answer D: Rs 2.

Percentage of face not dividend yield on market price.

FM-C08-P025 · 2 marks

D0=2, growth 20% two years then 5%, Ke 12%. Terminal P2 uses which dividend?

A. D2=2.88 because same terminal date. B. D0=2. C. D1=2.4. D. D3=3.024, not D2=2.88.

Explanation

Correct answer D: D3=3.024, not D2=2.88.

P2=D3/(Ke-g), ex-D2.

FM-C08-P026 · 2 marks

Constant annual dividend Rs 3 from end year 1 forever, Ke 10%. Price?

A. Rs 30. B. Rs 3. C. Rs 33. D. Rs 0 because growth zero.

Explanation

Correct answer A: Rs 30.

D/Ke.

FM-C08-P027 · 2 marks

P0=100, Ke 12%, D1=10 under MM. P1?

A. Rs 122. B. Rs 102. C. Rs 90 immediate no-time value shortcut. D. Rs 112 ignoring dividend.

Explanation

Correct answer B: Rs 102.

100 x 1.12-10.

FM-C08-P028 · 2 marks

Net ordinary earnings 100000, investment 200000, existing 10000 shares, DPS 5. New issue funds required?

A. Rs 50000 retained only. B. Rs 250000. C. Rs 100000 ignoring dividend. D. Rs 150000.

Explanation

Correct answer D: Rs 150000.

I-(E-nD)=200000-(100000-50000).

FM-C08-P029 · 2 marks

25% of a 10-share holder under proportional fractional model is how many shares?

A. 2.5, not 4. B. 5. C. 4 because printed in PDF. D. 2 exactly without allocation assumption.

Explanation

Correct answer A: 2.5, not 4.

Source page 4 arithmetic conflict; integer/tender terms separate.

FM-C08-P030 · 2 marks

120 shares at 90; 20% bonus with no tax/cost/new cash effect. Holder count/theoretical price?

A. 120 at 75 unchanged count. B. 144 at 90 guaranteed wealth gain. C. 144 shares at 75, same 10800 wealth. D. 360 at 30 is 20% bonus.

Explanation

Correct answer C: 144 shares at 75, same 10800 wealth.

Bonus divides same model value into 1.2 times shares.