cal rer Financial Accounting (T1B.CAF) (Sem. — 0) (Paper WM , ood slanple reasonable return on tangible capital, Consider closing capital as average capital employed average for computing average profit. Dividend recommended © 75 lakhs ‘You are required to determine. a) Value of goodwill on the basis of 5 years’ purchase of super profits. 'b) Intrinsic value of Equity Share. {Ams, : Net Assets © 763; Super profit © 16.9; Goodwill © $4.5; Value per share © 16.95; dividend is a contingent liability (See AS 4 revised)) Problems on Goodwill and Share Valuation « (Goodwill and share valuation) 20. The Balance Sheet of E Ltd.. ws on 31.12.2016 was as under : ‘On 31.12.2016; Building was taken as worth © 3,50,000 and Machinery £ 2,10,000, Income-Tax to all taken at $0. Looking to the nature of business 10% ts considered reasonable return on capital cr Find out the value of equity share under Net Asset Method, afer taking into account the revised of Fixed assets and after valuing Goodwill on the basis of Five years purchase of annual super profits. [Ams. : Goodwill ; & 1,70,800, Value of a share :@ 172.3; PMP ;& 130,480; ACE : © 9,63,200) All the assets were independently valued at ® 13,80,000. ‘The company earned net profits for the last five years as follows - 80,000, & 84,000, € 92,000, ® 88,000 and € 96,000 Find out the value of equity shares of the company by the : 4) Assets Valuation Method, and » ») Yield Valuation Method. Yams. : (4) © 148.33; (0) Yield Vale per share © 124.60; FMP ® 74,00; Rate ot FMP 12 ;Chey CA ie) De Balance Sheet of Vishnu Ltd on 31-12-2016 = Balance She: ' z 00 $0 t4 Ans: S r €43-460, FMP. © 42,50 follow the Balance Sheet of Z Lid. as. on 31st March, 2016 abilities e Ansets c ¢ Capital 5,000 Shares of 170,060,000 || Goodwill 3,80,000 © 100 each Land & Building 3,60,000 eserve Pund 3,00,000 || Less : Depreciation 72,000| 2,88,000 Works Fund 0,000 | | Plant & Machinery (at Cont}4,80,000 w *rofit S 20,000 || Less : Depreciation 80,000} 4,00,000 Profit & Lous A 3,00,000 | | Investments (to provide TOenare 4,60,000 replacement of Plant her Liabilines 2,00,000 & Machinery) 2,00,000 Book Debts 7,20,000 Leas : Provision 60,000 660,000 Stock 4,00,000 Cash at Bank Preliminary Expenses 24.20.0090 Further Information s) The profits earned by the company for the three years were as under Year ended 31st March 2014 © 6,20,000 Year ended 31st March 2015 © 5,46,000 Year ended 31st March 2016 © 5,80,000 The profits are before tax. Tax 50% b) _ Z_Ltd. had been carrying on business for the past several years The company is to be taken over by another company. For this purpose you are Goodwill by “Capitalisation of maintainable profits method”. For this purpose ee information is available lowing additional i) The new company expects to carry on business with its own board of di Toe oer Ths he fal by Z Lod, obs Moles cautnd ts SR/008 ube eae ii) The new company expects a large increase in volume of business and take an additional office for which wll have pay ooua ent of COANE SO ‘will have to No ads No limits on export~¥) (Paper - VD Prenat Acoosniiog TYBCAT) (Sie m ore Overdraft '32,000 500 = 12,89,000 The Net profits of the company after providing fortax were as follows s ‘ Year Ended ee 3ist March, 2017 1,50,000 3ist March, 2016 ase 3ist March, 2015 Bist March, 2014 ae 31st March, 2013 3 ‘On 31s March, 2016/Land and Bailding were values st © 3,75,000 and Plant and Machinery =e vohcod at € 225,000, Noma rate of renrn can be considered at 8%, Goodwill is to be valued st 3 Years purchase of super profits based on average profit of last 5 years. F . Find the intrinsic value of fully paid and partly paid equity shares. Consider closing capital employed a eae & 22,600; [Am. : Average profit © 1,65,000; Capital, employed © 17,80,000; Super. profit 22,600; Goodwill & 67,800; Value per share € 123.32; Value per share (partly paid) © 103.52) 16, The following particulars of Amber Lid. as on 31st March, 2016 are available : 1,00,000 Equity Shares of & 100 each fully paid 10,000 ~ 12% Preference Shares of € 100 each fully paid Securities Premium Ce Bills Payable 7. Average Profit after Tax (for last three years) 20% of profit after tax is transferred to General Reserve 9. Fictitious Assets € $0,000, 10. Normal Rate of Return is 10% 2. Yield Method [Ans : F.M.P. © 3,48,000; Value per share 34.8) Scanned by TapScannerRts, * March, 2018. e's? the year ended 31 M Lee . towing data fOr ty) 43/_Cateuilate EVA rom the | 276 vy | 6 . TARE Lsq) : Debt joe ~~ Exceptional Item ‘ t After Before eh After Taxes 7.72% ast of Debt (Post Tax) 16.7% ast of Equity ; 16.54% Toa Cost of Capital : f € 100 crores. The after.;, : sapital invested © ys. {Ams EVA T 1080.23 crores) | assets in which it has capita capital employed of 15% is expecta, M Consider a firm that has existing ass g 15 crore, The return Pio AN iS ae is 2 %, a oy ie Casey has a cost of capital 0 de sustained to perpetuity : ns, E TOES: i i tion of Hypothe ; th lowing informa tie IA BVA RS . x . Added (EVA) with the help of ie fol 10 BS Caleulate Economic Value : ae : ar : T98 Lakhs wi Capital Structure; Equity Capital Reserves and Surplus & 130 Lakhs 10% Debentures & 400 Lakhs Cost of Equity > 175% Income Tax Rate; 30% (Ans. EVA & 17,50 crores] : formance evaluation of its 36. Accountant of Shiva Ltd. uses Return on Investment (ROI) method for pe’ et, finance controller is of ini t Economic Value Addg, ‘wo divisions X and Y. However, finance controller is of the opinion tha’ + ent whether controle; (EVA) Method is a better measure, Based on following data of Shiva Ltd. comm is Tight. (Show Calculations) (All fig. are (= lakhs) ¥ Current Assets Fixed Assets 1,000 oe; ; ting EVA. Company charges to divisions 10% for current Assets and 13% for Fixed Assets while computing {Ans, en ny EVA (®) 36 Lakhs 60 Lakhs} 37. From the followi ng information concerning Nebula Ltd., Prepare a statement showing computation of EVA for the year ended 31“ March, 2018. Summarized Pro fit and Loss Account for the year ended 31" March, 2018. Cost of Goods Sold 20,00,000 12,00,000 —ShwYvYv Gross Profit 8,00,000 ses General 2,00,000 Office and Administration 2,50,000 ing and Distribution 64,000 5,14,000 Profit Before Interest and Tax (PBIT) ; 2,86,000 Interest 36,000 Profit Before Tax (PBT) 2,50,000 Tax 40% Profit After Tax Summarized Balance Sheet &s on 3ist March, 2018 Liabiltie:s Equity Shares 2,40,000 Fixed Assets (Net) Reserves 1,60,000 Current Assets : Term Loan 2,40,000 Stock 1,20,000 Current Liabilities 1,60,000 Debtors 60,000 - Bank : 8,00.000 reteValuation 73 yesiness er se Bi r Particulars 3 othe General expenses exclude R & D ex to be considered as an investment, Cost of goods sold include deprecatio : " expense of & 60,000, y 3. The PAT e235 ipo Of shareholders jg 12% : ae [Ee wal Ans, NO 71,0905 Capital Employed & 7,20,000; WACC & 79,200; EVA % 1,72,400] { ‘ ; Cement Ltd. used the Re fal t 38: JayMan. The company dire con: Value Added method for measuring divisional che €aCh division 4 5% return on its average current assets and . . data related to the year ended on 31" March, 2018 is given Penses of ¥ 80,000, For EVA computation R & D expenses arc return on its average fixed assets. The pelow nnn Sg Sted Data a sone a as pudgeted Current Assets ( geted Fixed Assets at Assets rixed Assets You are required to ; Calculate ROI, budgeted as we b) Calculate EVA, budgeted as ell as actual, well as actual, ‘Ans. Budgeted [ ROI Sone Actual Y o 16.33% 5 8.33% 9.375% EyA, X 55 35.5 : De ern din 5 20 27.5] The following data relates to Morning Glory Ltd ; 39. ( lakhs) Profit and Loss Data pretax Accounting Profit are aoe profit After Tax a ae Dividends } 100 120 Retained Earnings 194 250 € lakhs) Balance Sheet Data ~ Fixed Assets : Net Current Assets ; 1,54 1,960 Financed by : = ? Shareholders Funds i 1,190 1,440 Medium and Long Term Bank Loans 350 520 1,540 1,960 Pre-tax accounting profit is taken after deducting the economic depreciation of the company’s fixed assets (also the depreciation used for tax purpeses), Additional Information : i i) Economic depreciation were € 190 lakhs in 2017 and % 210 lakhs in 2018. ii) Interest expenses were ¥ 26 lakhs in 2017 and & 36 lakhs in 2018.Illustration : 35 (Sales Margin, CTO, ROI, EVA) From the following data pertaining to XYZ Ltd. for the year ended 31* March 2016, you are ert calculate following missing figure. Income Lo Sn Average Investment — 5 Sales Margin (%) © 3 Capital Turnover (Times) 2 ROI (%) 7 ; | 2 Economic Value Added ” 8% Weighted Average Cost of Capital ;Pee ee ag RG RD ' : Illustration : 36 (EVA) . Vidhi Ltd. provides you the following information as on 31” March 2018. Balance sheet as on 31-3-2018 Liabilities Fixed Assets Current Assets Share Capital 250 Reserve and Surplus Long Term Debts\ Creditors ~~~Business Valuation ors Additional information : i) Profit Before Interest and Taxes 2,000 lakhs ii) Interest paid ¥ 30 Lakhs iii) Tax rate : 30% : iv) Cost of Equity 12.62% : You are required to calculate the Economic Value added.