they have approached you to make an assessment of the price per equity share a purch 619472
Model: Value of shares—Net assets and PE ratio methods) Dev Ltd. is a going concern and its directors who are also owners have decided to sell their business. They have approached you to make an assessment of the price per equity share a purchaser might offer. The relevant information is as follows:
Balance Sheet as on 31 March 2010
|
Liabilities |
Assets |
||
|
Share Capital: |
Fixed Assets (Net Book Value) |
||
|
50,000 Equity Shares of Rs. 10 Each |
5,00,000 |
Land & Buildings |
14,00,000 |
|
Reserves Dividend Equalization Fund |
12,00,000 |
Plant & Equipment |
7,50,000 |
|
Secured Loan |
1,50,000 |
Motor Vehicle |
1,40,000 |
|
Staff Welfare Fund |
6,00,000 |
Intangible Assets |
10,000 |
|
Current Liabilities |
50,000 |
Current Assets: |
|
|
Creditors |
2,75,000 |
Stock |
3,00,000 |
|
Accrued Expenses |
1,25,000 |
Debtors |
2,50,000 |
|
Proposed Dividend |
75,000 |
Cash and Bank |
50,000 |
|
Deferred Advertisement Cost |
75,000 |
||
|
29,75,000 |
29,75,000 |
Net profits after tax and interest but before payment of dividends were: 2005–06: Rs.1,50,000; 2006–07: Rs.1,60,000; 2007-08: Rs.1,20,000; 2008–09: Rs.1,50,000; 2009–10: Rs.1,70,000. The fixed assets of the company have been valued by independent experts as follows:
|
Land & Buildings |
17,40,000 |
|
Plant & Equipment |
8,60,000 |
|
Motor vehicle |
1,00,000 |
The applicable price earnings PE ratio is 10. You are required to compute the value per equity share of the company based on:
- Net assets
- PE ratio