Model: Rate of return; Average capital employed and Intrinsic value of share The following is the balance sheet of VRV Ltd. as on 31 December 2009:
|
Liabilities |
Rs. |
Assets |
Rs. |
|
Share Capital: |
Land & Buildings |
5,00,000 |
|
|
1,50,000 Equity Shares of Z 10 Each Fully |
15,00,000 |
Plant & Machinery |
3,00,000 |
|
Paid |
Stock |
10,00,000 |
|
|
P&L A/c |
2,00,000 |
Sundry Debtors |
4,50,000 |
|
Sundry Creditors |
2,50,000 |
||
|
Bank Overdraft |
50,000 |
||
|
Provision for Taxation |
1,00,000 |
||
|
Dividend Equalization Fund |
1,50,000 |
||
|
22,50,000 |
22,50,000 |
The net profit of the company, after deducting all working charges and providing for depreciation and taxation were:
2005: Rs.2,00,000; 2006: Rs.2,25,000; 2007: Rs.2,50,000;
2008: Rs.2,75,000; 2009: Rs.3,00,000
On 31 December 2009, land and buildings were valued at Rs.6,25,000 and plant and machinery at 3,75,000. In view of the nature of business, it is considered that 10% is reasonable on capital.
You are required to calculate the value of the company’s share after taking into account the revised values on fixed assets and your own valuation of goodwill based on 3 years’ purchase of annual super profits.