The shares of Ritik Ltd. are presently traded at 64 and the company is expected to pay dividends of 6 per share with a growth rate expected at 12%…
CA Intermediate · Financial Management and Strategic Management · MTP · May 2026
The shares of Ritik Ltd. are presently traded at 64 and the company is expected to pay dividends of 6 per share with a growth rate expected at 12% per annum. It plans to raise fresh equity share capital. The merchant banker has suggested that an underpricing of 3is necessary in pricing the new issue besides involving a cost of 1 per share on miscellaneous expenses. The cost of new equity shares (assuming no change in dividend rate and growth rate) will be:
Suggested Answer and Working Notes:
Correct Answer: Option (D)
22%
Topics: Part-A: Financial Management
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