Model: Valuation of shares—Treatment of non-trading assets On 31 March 2010, the balance sheet of RBS Ltd. was as follows:
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10% Preference Shares (1,000) of Rs. 100
Land & Buildings
Each Fully Paid
50,000 Equity Shares of Rs. 10 Each Fully
Investment in 5% Govt. Securities at Cost
(Face Value of Rs.60,000)
Cash at Bank
Provision for Taxation
The assets were revalued as follows
Land & Building
The normal return on capital employed for valuation of goodwill is 10%, the basis of valuation being 4 years’ purchase of super profits.
50% of investment in building is treated as non-trading asset because a sum of Rs.12,000 is collected annually as rent from building.
You are required to calculate the value of each equity share assuming that the average annual profit after tax at 50% is Rs.1,32,500.