Page 225 - Corporate Finance PDF Final new link

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BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 225

II. ASSETS / AgoQ²>g
(1) Non-current Assets / Zm°Z-H$a§Q> AgoQ²>g:
(a) Fixed Assets / {’$³ñS> AgoQ²>g
(i) Tangible Assets / Q>¢{O~b AgoQ²>g 3,50,000
(b) Non-current investments = 6% Government Bond
Zm°Z-H$a§Q> bm¶{~{bQ>rO 45,000
(2) Current Assets / H$a§Q> AgoQ²>g:

(a) Other Current Assets / Aݶ H$a§Q> AgoQ²>g 2,00,000
TOTAL 5,95,000

The current market value of the plant included in fixed assets is ` 15,000 more.
The average profit of the company (after deductions for interest on debentures and govt.
taxes) is ` 68,000.
Expected rate of return is 10%; Assume rate of tax is 50%.
{’$³ñS> AgoQ²>g ‘| gpå‘{bV ßbm§Q> H$m dV©‘mZ ~mOma ‘yë¶ < 15,000 A{YH$ h¡&
H§$nZr H$m EdaoO àm°{’$Q> ({S>~|Ma na ã¶mO VWm JdZ©‘|Q> Q>¡³gog H$mQ>Zo Ho$ níMmV²) < 68,000 h¡&
[aQ>Z© H$s Ano{jV aoQ> 10% h¡; ‘mZm {H$ Q>¡³g H$s aoQ> 50% h¡&
Solution:
(a) Calculation of (closing Capital Employed)
Particulars `

Tangible Fixed Assets: ` (3,50,000 + 15,000) 3,65,000
Other Current Assets 2,00,000
5,65,000
Less: Liabilities:
Sundry Creditors 60,000
Provision for taxation 20,000 80,000
Closing Capital Employed 4,85,000
Alternatively, Capital Employed can be calculated as follows:

Particulars `

Equity Share Capital 3,00,000
General Reserve 1,25,000
4,25,000
Add: Increase in the value of Tangible Assets 15,000
4,40,000
Less: 6% Government Bond (Note 3) 45,000