Fundamentals of Financial Management, Third Edition

NUMERICAL PROBLEMS

1. The market price of a share is Rs 50, EPS is Rs 10, and net profit is Rs 20,000. Indicate optimal capitalisation.
2. If the market price of total assets is Rs 1,00,000, what should be the consolidated amount of debt and equity? Indicate this on the basis of the cost theory of capitalisation.
3. A company with a capital of Rs 7,00,000 earns Rs 50,000 a year, while the return on investment in that industry as a whole is 10%. Can it be called a situation of overcapitalisation? If it is over-capitalisation, indicate the amount by which profits need to be raised.