2. ABC Ltd. was started a year back with a paid up Equity Capital of `40,00,000. The...

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2. ABC Ltd. was started a year back with a paid up Equity Capital of `40,00,000. The other details are as under:

Earnings of the company `4,00,000 Dividend paid `3,20,000 Price-earnings ratio 12.5 Number of shares 40,000 You are required to find out whether the company’s dividend payout ratio is optimal, using Walter’s formula. [C.S. Final June 2000]

[Ans. P = `131.25, Not optimal, Optimal Payout is Zero, P = `156.25]

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