Titan Energy Systems Limited has a capital of Rs. 10,00,000 in equity shares of Rs. 100

each. The shares are currently quoted at par. The company proposes declaration of a

dividend of Rs. 10 per share at the end of current financial year. The Capitalisation rate for

the risk class to which the company belongs is 12%. What will be the market price of the

share at the end of the year, if:

a. Dividend is not declared.

b. Dividend is declared.

Assume that the company pays dividend and has net profits of Rs. 500,000 and makes new

investments of Rs. 10 Lakhs during the period, how many new shares must be issued. Use

the MM Model to explain with workings.