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192 Corporate Finance BRILLIANT’S

SOLVED PRACTICAL QUESTIONS

Illustration 3.1.1
The following particulars are available in relation to P Ltd.
{ZåZ{b{IV {ddaU P {b{‘Q>oS> Ho$ g§~§Y ‘| CnbãY h¢…
(i) Equity share Capital 5,000 equity shares of ` 20 each.
B{³dQ>r eo¶a H¡${nQ>b 5,000 < 20 à˶oH$ H$m B{³dQ>r eo¶g©

(ii) Preference share capital 1,000, 8% Preference shares of ` 100 each.
{à’$a|g eo¶a H¡${nQ>b 1000, 8% {à’$a|g eo¶g© à˶oH$ < 100 H$m

(iii) Reserves ` 30,000. / [aOìg© < 30,000
(iv) Current Liabilities ` 18,000. / H$a§Q> bm¶{~{bQ>rO < 18,000
(v) Loss on revaluation of fixed assets ` 12,000. / {’$³ñS> AgoQ²>g Ho$ [ad¡ë¶yEeZ na hm{Z < 12,000

(vi) Average trading profit ` 30,000 (after tax). / EdaoO Q´>oqS>J àm°{’$Q> < 30,000 (Q>¡³g Ho$ níMmV²)
(vii) Normal rate of return on capital employed 10%.
bJm¶o J¶o H¡${nQ>b na [aQ>Z© H$m gm‘mݶ aoQ> 10%
(viii) Goodwill should be valued at 3 years' purchase of Super Profit.
JwS>{db H$mo gwna àm°{’$Q> Ho$ 3 df© Ho$ nMo©g na ‘yë¶ bJm¶m OmZm Mm{hE&
Calculate intrinsic value per equity share. / à{V B{³dQ>r eo¶a H$s B§qQ´>{gH$ d¡ë¶y H$s JUZm H$s{OE&

Solution:
1. Calculation of capital Employed:
Particulars `

Equity Shares Capital (5000 × 20) 1,00,000
8% Preference Share Capital (1000 × 100) 1,00,000
Reserves 30,000
2,30,000
Less: Loss on Revaluation of Fixed assets 12,000
Capital Employed 2,18,000
2. Calculation of Super Profit:

Particulars `

Average Trading Profit after Tax 30,000
Less: Normal Return (10% of capital employed) 21,800
Super Profit 8,200

3. Value of Goodwill = 3 year's purchase of Super Profit = 3 × ` 8,200 = ` 24,600