CA Final · Advanced Financial Management · Business Valuation

Kapoor Engineering Ltd has the following: fixed assets with book value ₹40,00,000 and market value ₹55,00,000; investments with book value ₹10,00,000 and market value ₹12,00,000; current assets (book = realisable) ₹20,00,000; preference share capital ₹10,00,000 (to be repaid at par); long-term loan ₹15,00,000; current liabilities ₹8,00,000. There are 2,00,000 equity shares. What is the net-asset value per equity share on a fair-value basis?

The value is ₹27 per share. Fair-value assets total ₹87,00,000. Deducting preference capital, the long-term loan and current liabilities, totalling ₹33,00,000, leaves ₹54,00,000 for equity holders, which spread over 2,00,000 shares gives ₹27.

A₹27.00Correct
B₹23.00
C₹28.00
D₹26.00

Explanation

Assets at fair value = 55,00,000 + 12,00,000 + 20,00,000 = 87,00,000. Claims ahead of equity = 10,00,000 + 15,00,000 + 8,00,000 = 33,00,000. Equity = 54,00,000; per share = 54,00,000/2,00,000 = ₹27. Ignoring the preference capital would give ₹32, and using book values would give a much lower figure.

Did you get it right without looking?

One question tells you little. A timed set on Business Valuation shows your real accuracy, how long you take and where you lose marks.

Practise Business Valuation Free diagnostic mock

More Business Valuation questions