Multiple choice

The Board of Directors of a company decides to issue minimum number of equity shares of Rs. 10 each at 10% discount to redeem Rs. 5,00,000 preference shares. The maximum amount of divisible profits available for redemption is Rs. 3,00,000. The number of shares to be issued by the company will be

  1. 20,000 shares

  2. 22,223 shares

  3. 18,182 shares

  4. 25,000 shares
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Shares issued at 10% discount: issue price = Rs. 10 - Rs. 1 = Rs. 9. Amount to raise = Rs. 5,00,000 - Rs. 3,00,000 = Rs. 2,00,000. Shares needed = Rs. 2,00,000/Rs. 9 = 22,222.22, so 22,223 shares (cannot issue fraction).

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