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2. What would be the Market Price per Share (MPS) of the company if Price Earnings Ratio (PE ratio) in Plan-1 is 12 times and Plan-II is 15 times?

Options

A` 46.80 and ` 61.50
B` 40.32 and ` 58.20
C` 51.00 and ` 67.50
D` 52.44 and ` 63.90
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Correct Answer

Option A` 46.80 and ` 61.50

All Options:

  • A` 46.80 and ` 61.50
  • B` 40.32 and ` 58.20
  • C` 51.00 and ` 67.50
  • D` 52.44 and ` 63.90

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Detailed Solution & Explanation

To calculate the Market Price per Share (MPS) under both plans, we use the formula:
MPS=EPS×PE Ratio\text{MPS} = \text{EPS} \times \text{PE Ratio}

**1. EPS Values from Plan-I and Plan-II Calculations:**
* Plan-I EPS (EPSI\displaystyle \text{EPS}_I) = Rs. 3.90\displaystyle \text{Rs. } 3.90
* Plan-II EPS (EPSII\displaystyle \text{EPS}_{II}) = Rs. 4.10\displaystyle \text{Rs. } 4.10

**2. Plan-I Market Price per Share (MPS):**
* PE RatioI=12\displaystyle \text{PE Ratio}_I = 12
* MPSI=EPSI×PE RatioI=Rs. 3.90×12=Rs. 46.80\displaystyle \text{MPS}_I = \text{EPS}_I \times \text{PE Ratio}_I = \text{Rs. } 3.90 \times 12 = \text{Rs. } 46.80

**3. Plan-II Market Price per Share (MPS):**
* PE RatioII=15\displaystyle \text{PE Ratio}_{II} = 15
* MPSII=EPSII×PE RatioII=Rs. 4.10×15=Rs. 61.50\displaystyle \text{MPS}_{II} = \text{EPS}_{II} \times \text{PE Ratio}_{II} = \text{Rs. } 4.10 \times 15 = \text{Rs. } 61.50

Therefore, the MPS is `Rs. 46.80` under Plan-I and `Rs. 61.50` under Plan-II.

Hence, **Option A** is the correct answer.

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