Page 197 - Corporate Finance PDF Final new link

BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 197

Operating costs / Am°naoqQ>J H$m°ñQ> 3,45,000 3,95,000 4,45,000 2,95,000 4,95,000
Interest on Loan from Bank
~¢H$ go bmoZ na ã¶mO 25,000 25,000 25,000 25,000 25,000

 1 
Assume, rate of taxation at 60% and the rate of normal earnings at 12   %. Also show the
 2 
workings.

1 
‘mZm, {H$ Q>¡³goeZ H$s Xa 60% h¡ VWm gm‘mݶ A{ZªJ H$s aoQ> 12  % h¡& d{Hª$½g ^r Xem©B¶o&
 2 
Solution:
Calculation of Average Profit
Particular 2011 (`) 2012 (`) 2013 (`) 2014 (`) 2015 (`)

Sales NPP 6,00,000 7,00,000 8,00,000 5,00,000 9,00,000
Less: Operating Cost 3,45,000 3,95,000 4,45,000 2,95,000 4,95,000
Profit before interest and tax (PBIT) 2,55,000 3,05,000 3,55,000 2,05,000 4,05,000
Less: Interest on bank loan 25,000 25,000 25,000 25,000 25,000
Less : Interest on Debentures 30,000 30,000 30,000 30,000 30,000
Profit before tax (PBT) 2,00,000 2,50,000 3,00,000 1,50,000 3,50,000
Less: Tax @ 60% 1,20,000 1,50,000 1,80,000 90,000 2,10,000
Profit after tax (PAT) 80,000 1,00,000 1,20,000 60,000 1,40,000

80,000 1,00,000 1,20,000 60,000 1,40,000   
Average Profit  = ` 1,00,000;
5
1,00,000
Expected Rate of Earnings on Capital   100  40%
2,50,000
Normal rate of return = 12.5% (given):

Expected Rate of Earnings 40%
Value Per Share  × Face Value of Share  × ` 10= ` 32
Normal Rate of Return 12.5%

Illustration 3.1.4
From the following Balance Sheet of wish Co. Ltd. as on 31.12.2015, compute the value of its
equity shares by Earning Yield Method.
31.12.2015 H$mo {de H§$nZr {b{‘Q>oS> H$s {ZåZ{b{IV ~¡b|g erQ> go A{ZªJ ¶rëS> {d{Y go BgHo$ B{³dQ>r eo¶g© Ho$
‘yë¶ H$s JUZm H$s{OE&