4. A company belongs to a risk class for which the appropriate capitalization rate for is 10%.

It currently has outstanding 25,000 shares selling at `100 each. The firm is contemplating the declaration of `5 as dividend at the end of the current financial year. The company expects to have a net income of `2.5 lakhs and has a proposal for making new investments of `5 lakhs.

Answer the following questions based on M-M model (assume there is no tax):

(i) What will be the price per share at the end of the year if dividend is paid?

(ii) What will be the price per share at the end of the year if dividend is not paid?

(iii) How many new shares are to be issued?
(iv) Determine the value of the firm considering

(a) and

(b) above.