profits after tax for 3 years 2007 2008 and 2009 are after charging debentures inter 619517
The summarized balance sheet of Six Stars Ltd as on 31 December 2009:
|
Liabilities |
Assets |
||
|
Share Capital: |
Goodwill |
2,00,000 |
|
|
(In Shares of |
|||
|
Rs.100 Each) |
|||
|
6,000, 6% Prefer- ence Shares |
6,00,000 |
Freehold Prop- erty |
15,00,000 |
|
26,000 Equity |
26,00,000 |
Plant & |
14,00,000 |
|
Shares |
Machinery (Less |
||
|
Depreciation) |
|||
|
Profit & Loss A/c |
18,00,000 |
Stock |
14,80,000 |
|
5% Deben- tures-2001 |
12,00,000 |
Debtors (Net) |
15,97,000 |
|
Sundry Creditors |
9,57,000 |
Bank Balance |
9,80,000 |
|
71,57,000 |
71,57,000 |
Profits after tax for 3 years 2007, 2008 and 2009 are after charging debentures interest were 8,82,000; Rs.12,90,000 and Rs.9,60,000, respectively. Mr. Manu is interested in buying all the equity shares and requests you to let him know the proper price. You get the following information:
- The normal rate of return is 10% on the net assets attributed.
- Goodwill may be calculated at 3 times adjusted average super profits of the 3 years referred to above (Present value of Rs.1 is Rs.2.487).
- The value of freehold is to be ascertained on the basis of 8% return. The current rental value is Rs.2,01,600.
- Rate of tax applicable is 50%.
- 10% of profits for 2008 referred to above arose from a transaction of non-recurring mature.
- A provision of Rs.63,000 on sundry debtors was made in 2009 which is no longer required; profit for the year 2009 is to be adjusted for this item.
- A claim of Rs.33,000 against the company is to be provided and against profit for 2009.
Ascertain the value of goodwill of the company by taking the capital employed as on 31 December 2009.