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Fm Project

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  • April 2013
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INTRODUCTION
The dividend policy of a company determines what proportion of earnings is distributed to the shareholders by way of dividends, and what proportion is ploughed back for reinvestment purposes. Since the main objective of financial management is to maximize the market value of equity shares, one key area of study is the relationship between the dividend policy and market price of equity shares. The project analyses the relationship between the dividend policy and the market share prices of the two Indian cement manufacturing giants ACC LTD. & AMBUJA CEMENT LTD. Other factors have been also discussed which have an impact on the share prices of the companies.

OBJECTIVES
* To estimate how dividend policy influences the share value of two companies of the same industry viz. ACC LTD. & AMBUJA CEMENT LTD.: A comparative study.

MATERIALS & METHODS
* Balance sheets, stock index cart & Profit & Loss statements of 5 years – 2008-2012 of both the companies derived from company’s websites. * The various values used and calculated using the following formulae: (i) No. of equity shares = equity share capital / face value of each share. (ii) Dividend per share (DPS) = Equity Dividend / face value (iii) Cost of internal/external equity: Dividend Growth Model: K = (DIV1 / P0) + g

&
DIV1=DIV0 (1+g) (where, DIV1 is DPS in next year and DIV0 in the current year and ‘g’ is growth rate and P0 is market price of share in the current year) (iv) R (rate of return) = {DPS + (P1-P0)} / P0 (where P0 is market price of share in the current year & P1 is the market price of share in the next year). In our case we used the mean of the R values.

ANALYSIS & FINDINGS
Table-1: Correlation between DPS & MPS

COMPANY: Mahindra and MahindraLtd|
YEAR| DPS| MPS|
2012| 52.116| 2710.86|
2011| 48.094| 2498.33|
2010| 38.842| 2048.16|
2009| 20.454| 965.21|
2008| 23.642|...