From the following particulars, calculate the fair value of an equity share assuming that out of the…

Model: Fair value of equity shares

From the following particulars, calculate the fair value of an equity share assuming that out of the total assets, those amounting to Rs.19,00,000 are fictitious.

1.Share capital:

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2,00,000 15% Preference shares of Rs.100 each, fully paid 20,00,000 Equity shares of Rs.10 each, fully paid Liabilities to outsiders: Rs.34,50,000 Reserves & Surplus: Rs.17,50,000 The average normal profit after taxation earned every year by the company during the last 5 years: Rs.40,00,000 The normal profit earned on the market value of fully paid equity shares of similar companies is 10%

 

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