CA Final · Advanced Financial Management · Business Valuation
Kaveri Auto Ltd has 20 lakh equity shares with a market price of Rs 150 per share. The book value of equity (capital employed by shareholders) is Rs 22 crore. There is no preference capital. What is its Market Value Added (MVA)?
MVA is Rs 8 crore. Market capitalisation is 20 lakh shares times Rs 150, equal to Rs 30 crore, and subtracting the Rs 22 crore of capital contributed by shareholders gives the wealth created above capital invested.
- ARs 8 croreCorrect
- BRs 30 crore
- CRs 52 crore
- DRs 22 crore
Explanation
Market value of equity = 20 lakh x 150 = Rs 30 crore. MVA = market value - capital invested = 30 - 22 = Rs 8 crore. Rs 30 crore is wrong as it ignores deducting the capital invested.
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