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.
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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%