Page 536 - FM Integrated WorkBook STUDENT 2018-19
P. 536
Chapter 21
Chapter 20
Question 1
Asset based valuation
The following are extracts from the statement of financial position of MNM Co,
an unquoted company, as at 31 December 20X6.
$
Non-current assets (written down value) 1,278,000
Net current assets 395,000
$0.50 ordinary shares 1,500,000
Reserves 687,000
8% loan notes 500,000
Further information is provided as follows:
A recent valuation of the non-current assets put them at 45% above their
current written down value.
The loan notes are redeemable at a 10% premium.
There is a long outstanding debt of $20,000 in receivables that is not expected
to be received.
Calculate the value of a share in MNM Co.
Total value of assets: $1,278,000 × 1.45 + $395,000 – $20,000 = $2,228,100
Less: redemption value of debt: $500,000 × 1.10 = $550,000
Value of all shares = $1,678,100
Number of shares in issue: $1,500,000/$0.50 = 3,000,000
Value per share: $1,678,100/3,000,000 = $0.56 per share.
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