You are required to calculate the value of the company’s share after taking into account the revised…

Model: Rate of return; Average capital employed and Intrinsic value of share The following is the balance sheet of VRV Ltd. as on 31 December 2009:

Liabilities Rs.

Assets Rs.

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Share Capital:

Land & Buildings

5,00,000

1,50,000 Equity Shares of Z 10 Each Fully

15,00,000

Plant & Machinery

3,00,000

Paid

Stock

10,00,000

P&L A/c

2,00,000

Sundry Debtors

4,50,000

Sundry Creditors

2,50,000

Bank Overdraft

50,000

Provision for Taxation

1,00,000

Dividend Equalization Fund

1,50,000

22,50,000

22,50,000

The net profit of the company, after deducting all working charges and providing for depreciation and taxation were:

2005: Rs.2,00,000; 2006: Rs.2,25,000; 2007: Rs.2,50,000;

2008: Rs.2,75,000; 2009: Rs.3,00,000

On 31 December 2009, land and buildings were valued at Rs.6,25,000 and plant and machinery at 3,75,000. In view of the nature of business, it is considered that 10% is reasonable on capital.

You are required to calculate the value of the company’s share after taking into account the revised values on fixed assets and your own valuation of goodwill based on 3 years’ purchase of annual super profits.

 

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