Under the yield method of valuation of equity share capital, if for an equity share of Rs. 50 the normal rate of return is 10% and expectedrate of return is 5%, then the value of an equity share will be

The correct answer is B. Rs. 40.

The yield method of valuation of equity share capital is based on the assumption that the value of an equity share is equal to the present value of its expected future dividends. The expected future dividends are discounted at a rate of return that is considered to be fair and reasonable.

In this case, the normal rate of return is 10% and the expected rate of return is 5%. This means that the market is expecting the company to pay out a dividend of Rs. 5 per share in the future. The value of the equity share is therefore equal to Rs. 40.

Here is a step-by-step explanation of how to calculate the value of an equity share using the yield method:

1. Calculate the expected future dividends. In this case, the expected future dividend is Rs. 5 per share.
2. Calculate the discount rate. The discount rate is the rate of return that is considered to be fair and reasonable. In this case, the discount rate is 5%.
3. Calculate the present value of the expected future dividends. The present value of the expected future dividends is equal to the expected future dividends divided by the discount rate. In this case, the present value of the expected future dividends is Rs. 40.
4. Calculate the value of the equity share. The value of the equity share is equal to the present value of the expected future dividends. In this case, the value of the equity share is Rs. 40.

I hope this explanation is helpful. Please let me know if you have any further questions.