14. X Ltd. has 8 lakhs equity shares outstanding at the beginning of the accounting year 2005. The current market price of the shares is `120 each. The BOD of the company has recommended `6.40 per share as dividend. The rate of capitalisation, appropriate to the risk class to which the company belongs, is 9.6%.

(i) Based on M-M approach, calculate the market price of the shares of the company when the recommended dividend is

(a) declared and

(b) not declared.

(ii) How many new shares are to be issued by the company at the end of the accounting year on the assumption that the Net Income for the year is `1.60 crores and the investment budget is `3.20 crores when

(a) the above dividends are distributed and

(b) dividends are not declared? [C.A. Final May 2003]

[Ans. (i) `125.12, `131.52, (ii) New shares = 168798, 121655]