Scribd
Upload
156 views

Asset Base Approach Problems

1. The document provides the balance sheet of Tata Motors for the years ending March 2015 and March 2014. 2. It shows that total assets decreased from Rs. 49,734 crore in 2014 to Rs. 49,943 crore in 2015 while total liabilities remained roughly the same. 3. Book value per share increased from 2014 to 2015 as total equity increased despite the same number of shares outstanding.

Uploaded by

pratik waliwandekar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
156 views

Asset Base Approach Problems

1. The document provides the balance sheet of Tata Motors for the years ending March 2015 and March 2014. 2. It shows that total assets decreased from Rs. 49,734 crore in 2014 to Rs. 49,943 crore in 2015 while total liabilities remained roughly the same. 3. Book value per share increased from 2014 to 2015 as total equity increased despite the same number of shares outstanding.

Uploaded by

pratik waliwandekar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

CORPORATE VALUATION

Asset-Based Approach
1. Following is the balance sheet of Bell Electronics Limited as on 31 st march,
current year.
Liabilities Amount Assets Amount Amount
Share capital Fixed assets 30,00,000
8,000 11% preference Less: 6,00,000 24,00,000
shares of ₹100 each fully 8,00,000 depreciation
paid-up Current assets: 20,00,000
24,000 equity shares of 24,00,000 Stock 10,00,000
₹100 each fully paid-up 4,60,000 Debtors 2,00,000 32,00,000
Profit and loss account 4,00,000 Cash and bank
10% debentures 14,20,000 Preliminary 40,000
Trade creditors 1,60,00 expenses
Provision for income tax 0
56,40,000 56,40,000

Additional Information
1. A firm of professional valuers has provided the following market estimates of its
various assets Rs. 26,00,000, stock Rs. 20,00,000, debtors Rs. 9,00,000.
2. The company is yet to declare and pay dividend on preference shares.
3. The valuers also estimate the current sale proceeds of the firm’s assets, in the
event of its liquidation: Fixed Assets Rs. 21,00,000, Stock Rs. 18,00,000,
Debtors Rs. 8,00,000. Besides, the firm is to incur Rs. 3,00,000 as liquidation
cost.
You are required to compute the net asset as per share as per book value, market value
and liquidation value bases.

2. Balance sheet of Horizon Ltd. as on March 31, 2001 is as under:

Balance Sheet (As On March 31, 2001)


Liabilities Rs. Assets Rs.
Share Capital 30.00 Fixed Assets (Net) 33.00
Equity 15.00 Gross Block 59.00
Preference 15.00 Acc. Depreciation 26.00
Reserves & Surplus 11.20 Investment 15.50
Secured Loans: 14.30 Current Assets 24.50
Term Loans 7.00 Cash and Bank 2.00
Debentures 7.30 Debtors 11.40
Unsecured Loans: 6.90 Inventories 10.50
Bank Credit 2.50 Prepaid Expenses 0.50
Inter-Corporate Loans 4.40
Current Liabilities and 10.50
Provisions

72.90 72.90
Additional information
a. The following market estimates of its various assets are available as under: Fixed
assets(Net) Rs. 43 lakh, Inventories Rs.12.50 lakh. Investments Rs. 12.50 lakh.
All other assets are to be taken at their balance sheet values.
b. The company is yet to declare and pay dividend on preference shares of Rs.
1.50 lakh.
You are required to compute the net asset value per share as per book value and
market value bases.
3. Balance sheet of a corporate as on March 31, current year is as follows
(amount in Rs. crores)
Liabilities ₹ Assets ₹
Equity share capital (1 crore shares) 200 Plant and machinery 250
Reserve and surplus 180 Land and building 150
12% Debentures 150 Inventory 80
Total creditors 35 Receivables 60
Other current liabilities 15 Other current assets 40

580 580

The market value of its assets as assessed by professional valuer is as follows(Rs. In


crore)
Plant and machinery 180
Land and building 300
The current resale value of the remaining assets as per their book values
The income tax liability of Rs.5 arose during the year and the company is yet to pay it.
You are required to compute the value of equity share on the bases of net assets
method (book value and market value).

4. The following are the balance sheet of Jay Ltd. and Vijay Ltd. as on 31 st March
2015:
Liabilities Jay Rs. Vijay Rs.
Equity share capital (₹10 each) 40 18
General reserve 50 10
Profit and loss account 30 08
12% Debentures 35 --
Creditors 20 10
Bills payable 05 04
180 50
Assets Jay Rs. Vijay Rs.
Fixed Assets 70 30
Investments 50 --
Current assets 60 20
180 50
The board of directors of Jay Ltd. approved a takeover of Vijay Ltd as on 30yh
September 2015.
Find out the ratio of exchange of shares on d basis of book values.

5. In October 1999, the market price of the equity of Reliance Industries


Limited(RIL) was hovering around 400 per share. All that time the paid up equity
capital of RIL was about Rs.1000 crore, 100 crore shares of 10 each, Anil
Ambani issued a public statement that the market was significantly undervaluing
the RIL share. He argued that the intrinsic value per share of RIL was Rs. 650
per share. He arrived at this number as under
 Replacement cost of RIL’s plant 40,000 cr.
 Value of RIL’s shareholding in Reliance petroleum Ltd. 15,000 cr.
 Value of RIL’s shareholdings in BSES and L&T 10,000 cr.
 Value of RIL’s 30 % stake in Panna, Mukti and Tapti oil ventures 2,600 cr.
 Cash holdings 6,000 cr.
 Outstanding debt 9,000 cr.
Is the statement of Anil Ambani right? please prove
--------------------------------------------------------------------------------------------------------------

6. From the following balance sheet of Tata motors the book value per share for
both the years and comment on your findings.
Tata motors Ltd. balance sheet( new –standalone- actual –abridge –[INR-crore]
DISCRPTION Mar-15 Mar-14

EQITY AND LIABILITIAES


Share Capital ( Face Value 2) 643.78 643.78
Total Reserve 14218.81 18532.87
Secured Loans 1203.36 2505.37
Unsecured Loans 11115.60 7241.08
Deferred Tax Assets/Liabilities 43.11
Other Long Term Liabilities 286.80 1155.48
Long Term Provisions 2104.19 815.20
Trade Payables 8852.65 9672.36
Other Current Liabilities 3142.88 9672.36
Short Term Borrowings 7762.01 4769.08
Short Term Provisions 613.09 1892.91
Total Liabilities 49943.17 49734.42
ASSETS
Gross Block 31814.21 28791.45
Less: Accumulated Depreciation 16030.98 13550.88
Net Block 15783.23 15240.57
Capital Work In Progress 1349.95 1716.85
Intangible Assets Under Development 4690.84 4638.22
Non-Current Investment 16966.95 18357.57
Long Term Loans And Advance 1275.88 2072.96
Other Non-Current Assets 1303.35 969.19
Current Investments 20.22 100.85
Inventories 4802.08 3862.53
Sundry Debtors 1114.48 1216.70
Cash And Bank 944.75 226.15
Other Current Assets 1072.30 996.56
Short Term Loans And Advances 619.14 336.27
Total Assets 49943.17 49734.42

Note: since b. r is decreased, it is course of concern so the company should take


necessary action.

You might also like