From the following particulars calculate the value of share of Z Ltd. on yield basis:
Balance Sheet of Z Ltd. as on 31st March, 2011
Liabilities |
Rs |
Assets |
Rs |
80,000 equity shares |
Land and buildings |
5,00,000 |
|
of `Rs.10 each |
8,00,000 |
Plant and machinery |
6,00,000 |
4,000 9% preference |
Patents |
2,00,000 |
|
shares of `Rs.100 each |
4,00,000 |
Sundry debtors |
3,00,000 |
10% Debentures |
2,00,000 |
Work in progress |
|
Reserves |
4,00,000 |
and stock |
5,00,000 |
Sundry creditors |
4,00,000 |
Cash at bank |
1,00,000 |
22,00,000 |
22,00,000 |
Land and buildings to be valued at 9,00,000. The company’s earnings were as follows:
Year ended 31st March |
Profits before tax Rs |
Tax paid Rs |
2007 |
3,00,000 |
80,000 |
2008 |
4,00,000 |
1,60,000 |
2009 |
1,00,000 |
40,000 (Strike) . |
2010 |
5,00,000 |
2,30,000 |
2011 |
5,50,000 |
3,00,000 |
The company paid managerial remuneration of Rs.60,000 per annum but it will become Rs.1,00,000 in future. There has been no change in capital employed. The company paid dividend of 90 paise per share and it will maintain the same in future. The company proposes to build up a plant rehabilitation reserve. Dividend rate in this type of company is fluctuating and the asset backing of an equity share is about 1 1/2 times. The equity shares with an average dividend of 8% sell at par. (Tax rate is assumed to be 40%).