Tuesday, September 16, 2008

Power of Compounding

How much can you make in 25+ years by just investing Rs.10,000 initially in any of financial instruments ?
Let us look at the real time example…
If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…
In 1981 company declared 1:1 bonus = you have 200 shares
In 1985 company declared 1:1 bonus = you have 400 shares
In 1986 company split the share to Rs. 10 = you have 4,000 shares
In 1987 company declared 1:1 bonus = you have 8,000 shares
In 1989 company declared 1:1 bonus = you have 16,000 shares
In 1992 company declared 1:1 bonus = you have 32,000 shares
In 1995 company declared 1:1 bonus = you have 64,000 shares
In 1997 company declared 1:2 bonus = you have 1,92,000 shares
In 1999 company split the share to Rs. 2 = you have 9,60,000 shares
In 2004 company declared 1:2 bonus = you have 28,80,000 shares
In 2005 company declared 1:1 bonus = you have 57,60,000 shares
At the end of 2005…
You have 57,60,000 shares of the company
Any guess about the company ? Its an Indian company
Any guess about the present valuation ?
The result of ‘Power of Compounding’
Your present valuation is about
Rs. 200 Cr.+ & The company is ‘WIPRO’

1 comment:

AniRam said...

Good one. you can mention even Infosys too.

Ramesh Bhat
bhatofaniram@gmail.com