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CS Professional · Corporate Restructuring, Valuation and Insolvency · Valuation of Business and Assets for Corporate Restructuring

Kaveri Textiles Ltd has total assets (book value) of Rs 50 crore, of which fictitious assets (preliminary expenses) are Rs 1 crore. Outside liabilities are Rs 22 crore and there are 2 crore equity shares. Ignoring any revaluation, what is the net asset value per share under the book value approach, after excluding fictitious assets?

The NAV per share is Rs 13.50. Fictitious assets of Rs 1 crore are excluded from Rs 50 crore total assets, outside liabilities of Rs 22 crore are deducted, leaving Rs 27 crore, which divided by 2 crore shares gives Rs 13.50.

  1. ARs 13.50Correct
  2. BRs 14.00
  3. CRs 11.00
  4. DRs 12.50

Explanation

Net assets = 50 - 1 (fictitious) - 22 (liabilities) = Rs 27 crore. Dividing by 2 crore shares gives Rs 13.50. Rs 14.00 results from forgetting to remove the fictitious asset; Rs 11.00 deducts liabilities twice in effect (ignores the asset base).

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