CA Final · Advanced Financial Management · Business Valuation
Kaveri Plastics Ltd has total assets of ₹120 lakh as per its balance sheet, which include preliminary expenses not yet written off of ₹4 lakh. Outside liabilities are ₹36 lakh. The company has 4 lakh equity shares of ₹10 each and no preference shares. What is the net asset value per equity share?
The NAV per share is ₹20. Remove the fictitious asset (preliminary expenses ₹4 lakh) from total assets of ₹120 lakh and deduct outside liabilities of ₹36 lakh, leaving ₹80 lakh. Dividing by 4 lakh equity shares gives ₹20 per share.
- A₹20Correct
- B₹21
- C₹29
- D₹30
Explanation
Preliminary expenses are a fictitious asset with no realisable value, so they are excluded. Net assets = 120 − 4 − 36 = ₹80 lakh. Dividing by 4 lakh shares gives ₹20. Option ₹21 is wrong because it leaves the preliminary expenses in the assets (84/4).
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