A company issued 50,000 Equity shares of Rs. 10 each, Rs. 8 paid up and 50,000 8% Preference shares of Rs. 100 each. Expected profits are Rs. 10,00,000 Normal rate of dividend on Equity shares is 16%, Provision for taxation 60% and 10% of the profit is transferred to reserves. The value of equity share will be:

The correct answer is D. None of the above.

The expected profit is Rs. 10,00,000. The preference dividend is 8%, so the preference dividend is Rs. 80,000. The tax rate is 60%, so the tax is Rs. 6,00,000. The amount transferred to reserves is 10%, so the amount transferred to reserves is Rs. 1,00,000. The remaining profit is Rs. 3,00,000. The number of equity shares is 50,000, so the per-share profit is Rs. 6. The normal rate of dividend on equity shares is 16%, so the per-share dividend is Rs. 9.6. The value of equity share is not equal to the per-share dividend, so the answer is D. None of the above.

Option A is incorrect because the value of equity share is not equal to Rs. 40.

Option B is incorrect because the value of equity share is not equal to Rs. 50.

Option C is incorrect because the value of equity share is not equal to Rs. 45.