6. The Cost of Capital and the Rate of Return on Investment of WM Ltd. is 105 and 15%

respectively. The company has 10,00,000 equity share of `10 each outstanding and its earnings per share is `5. Calculate the value of the firm in the following situations using Walter’s Model: (i) 100% retention, (ii) 50% retention, (iii) No retention. Comment on your result.

[C.S.Final Dec. 1995]

[Ans. (i) `750 lakhs, (ii) `625 lakhs, (iii) `500 lakhs]