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CMA Final · Strategic Performance Management and Business Valuation · Laws and Compliance in Business Valuation

Mehta Textiles Ltd, an unlisted company, is valued by a registered valuer using the Net Asset Value (NAV) method. Book values of assets are Rs 900 lakh, of which fictitious assets (preliminary expenses) are Rs 20 lakh. Fair value of land is Rs 150 lakh higher than its book value. Outside liabilities are Rs 380 lakh. There are 5 lakh equity shares. What is the NAV per share?

NAV per share is Rs 130. Adjust book assets of Rs 900 lakh by removing Rs 20 lakh fictitious assets and adding Rs 150 lakh land revaluation to get Rs 1,030 lakh, deduct Rs 380 lakh liabilities to get Rs 650 lakh, and divide by 5 lakh shares.

  1. ARs 130Correct
  2. BRs 134
  3. CRs 126
  4. DRs 100

Explanation

Adjusted assets = 900 - 20 + 150 = Rs 1,030 lakh. Less outside liabilities 380 gives net assets of Rs 650 lakh. Divided by 5 lakh shares = Rs 130. Rs 134 results from forgetting to deduct the fictitious assets (700... actually 670/5), and Rs 100 results from ignoring the land revaluation (500/5).

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