10 each fully paid up 1800 Other Fixed Assets Current Assets 11166 2910 90 lakh

10 each fully paid up 1800 other fixed assets current

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10 each, fully paid up 1,800 Other Fixed Assets Current Assets 11,166 2,910 90 lakh Equity shares of Rs. 10 each, Rs. 8 paid up 720 Loans and Advances Miscellaneous Expenditure 933 171 150 lakh Equity shares of Rs. 5 each, fully paid-up 750 Reserves and Surplus 5,628 Secured Loans 4,500 Current Liabilities 1,242 Provisions 960 ______ 15,600 15,600
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FINAL EXAMINATION : NOVEMBER, 2005 12 You are required to calculate the following for each one of the three categories of equity shares appearing in the above mentioned Balance Sheet: (i) Intrinsic value on the basis of book values of Assets and Liabilities including goodwill; (ii) Value per share on the basis of dividend yield. Normal rate of dividend in the concerned industry is 15%, whereas Glorious Ltd. has been paying 20% dividend for the last four years and is expected to maintain it in the next few years; and (iii) Value per share on the basis of EPS. For the year ended 31st March, 2005 the company has earned Rs. 1,371 lakh as profit after tax, which can be considered to be normal for the company. Average EPS for a fully paid share of Rs. 10 of a Company in the same industry is Rs. 2. (16 Marks) Answer (i) Intrinsic value per share on the basis of book values Rs. in lakhs Rs. in lakhs Goodwill 420 Other Fixed Assets 11,166 Current Assets 2,910 Loans and Advances 933 15,429 Less: Secured loans 4,500 Current liabilities 1,242 Provisions 960 6,702 8,727 Add: Notional call on 90 lakhs equity shares @ Rs. 2 per share 180 8,907 Value per equivalent share of Rs.10 each = 25.82 Rs. shares lakhs * 345 lakhs 907 , 8 . Rs = (approx) Hence, intrinsic values of each equity share are as follows: Value of fully paid-up share of Rs. 10 = Rs. 25.82 Value of partly paid-up share of Rs. 8 = Rs. 25.82 – Rs. 2 = Rs. 23.82 Value of fully paid-up share of Rs. 5 = 12.91 Rs. 10 5 25.82 . Rs = ×
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PAPER – 1 : ADVANCED ACCOUNTING 13 *Calculation of equivalent number of equity shares of Rs. 10 each: Shares in lakhs Fully paid shares of Rs. 10 each 180 Partly-paid shares after notional call 90 Fully paid shares of Rs. 5 each, · ¸ ¹ º » × 5 Rs. 10 . Rs lakhs 0 5 1 . Rs 75 345 (ii) Value per share on dividend yield basis: Value of fully paid-up share of Rs. 10 = 13.33 Rs. 10 Rs. 15 20 = × (approx) Value of partly paid-up share of Rs. 8 = 10.67 Rs. 8 Rs. 15 20 = × (approx) Value of fully paid-up share of Rs. 5 = 6.67 Rs. 5 Rs. = × 15 20 (approx) (iii) Value per share on the basis of EPS: Profit after tax = Rs. 1,371 lakhs Total share capital = Rs. (1,800 + 720 + 750) lakhs = Rs. 3,270 lakhs Earning per rupee of share capital = 0.419 Re. lakhs 270 , 3 lakhs 371 , 1 . Rs = (approx) Earning per fully paid share of Rs. 10 = Re. 0.419 × 10 = Rs. 4.19 Earning per share of Rs. 10 each, Rs. 8 paid-up = Re. 0.419 × 8 = Rs. 3.35 (approx) Earning per share of Rs. 5, fully paid-up = Re. 0.419 × 5 = Rs. 2.10 (approx) Value of fully paid share of Rs. 10 = 20.95 Rs. 10 2 19 . 4 . Rs = × Value of share of Rs. 10, Rs. 8 paid-up = 16.75 Rs. 10 2 35 . 3 . Rs = × Value of fully paid share of Rs. 5 = 10.50 Rs. 10 2 10 . 2 . Rs = ×
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FINAL EXAMINATION : NOVEMBER, 2005 14 Question 4 (a) Venus Ltd. has an asset, which is carried in the Balance Sheet on 31.3.2005 at Rs. 500 lakhs. As at that date the value in use is Rs. 400 lakhs and the net selling price is Rs.
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