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CMA Final · Strategic Performance Management and Business Valuation · Fundamentals of Business Valuation

Kaveri Textiles has a maintainable annual profit after tax of ₹90 lakh. A comparable listed company trades at a price-earnings multiple of 12. Kaveri is unlisted, and the valuer applies a 25% discount for lack of marketability to the value derived from the multiple. The equity value of Kaveri Textiles is:

The equity value is ₹8.10 crore. Maintainable profit of ₹90 lakh times a multiple of 12 gives ₹10.80 crore, and a 25 percent marketability discount for the unlisted status removes ₹2.70 crore, leaving ₹8.10 crore.

  1. A₹8.10 croreCorrect
  2. B₹10.80 crore
  3. C₹13.50 crore
  4. D₹7.20 crore

Explanation

Value before discount = 90 lakh x 12 = ₹10.80 crore. Discount for lack of marketability = 25% x 10.80 = ₹2.70 crore. Equity value = ₹8.10 crore. Option ₹10.80 crore ignores the discount; ₹7.20 crore wrongly uses a 33.3% discount.

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