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Equity Share Valuation of Honda Ltd.

The document provides a detailed computation of the equity share value for Honda Ltd. as of December 31, 2016. It includes calculations based on net asset value, yield method, and intrinsic value, resulting in an equity share value of approximately 202.4. Key financial figures include total net assets of 12,20,000 and profit available to equity shareholders of 95,400.

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17 views2 pages

Equity Share Valuation of Honda Ltd.

The document provides a detailed computation of the equity share value for Honda Ltd. as of December 31, 2016. It includes calculations based on net asset value, yield method, and intrinsic value, resulting in an equity share value of approximately 202.4. Key financial figures include total net assets of 12,20,000 and profit available to equity shareholders of 95,400.

Uploaded by

g22.adhyan.sahu
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Q.] From the following information compute the value of equity share of Honda Ltd.

The summarize balance


sheet as on 31st 2016.
Liabilities Amt Asset Amt
1 Share capital Land & Building 3,00,000
a.)10% Preference shares 80,000 Plant and
of Rs.100 each Machinery 3,00,000

b.)8000 equity shares of


Rs.100 each fully paid 8,00,000 Stock in trade 1,50,000
c.) Reserves and Surplus 2,00,000 Debtors 60,000
2 Secured Loan Cash at Bank 1,50,000
a.)9% Debentures of
Rs.100 80,000 Cash in Hand 90,000

Investment in govt
b.) Sundry Creditors 50,000 Securities 90,000
Preliminary
Expenses 70,000
12,10,000 12,10,000

On 31st December 2016 the goodwill of the company was valued at Rs.210,000 the avg net profit earned by the
company Rs.114,000. Every year on the amount equal to 10% of the profit was transferred to general reserve. In
return of 10% on investment is considered for in the industry.
Solution: -
1.] Net asset Value of Equity Share

Particulars Amt Amt


A. All asset on agreed value
Land & Building 3,00,000
Plant and Machinery 3,00,000
Goodwill 2,10,000
Stock in trade 1,50,000
Debtors 60,000
Cash in Hand 90,000
Cash at Bank 1,50,000
10% govt Securities 90,000 13,50,000
B. All extended liabilities
9% Dentures 80,000
Sundry Creditors 50,000 1,30,000
Net Assets 12,20,000
Less: -10% Preference shares Dividend -80,000
Net Assets Available for equity shareholder 11,40,000
Net asset available for equity shareholder
Value of Share = No. of equity shares

11, 40,000
= 8000

= 142.5

2.] Yield Method


Calculation of Fair Market Prices (FMA) / Expected Return
Particulars Amt
Average Profit 1,14,000
Less: - Preference dividend (10% of 80,000 8,000
1,06,000
Less: -transfer to reserve 10% 10,600
Profit Available to equity Shareholder 95,400

Expected rate of return =


Profit available¿ equity shareholder ¿ X 100
Paid up Value of equity share capital

95,400
= 8 , 00,000
X 100

=11.9
3.] Value of Equity Share
Expected rate of return
A.) Value of Share = Normal rate of return
X Paid up value per equity share

11.9
= 10
X 100

= 119
B.) Dividend Basis
Intrensic Value+Yield Value
Value of Share = 2
142.2+ 119
= 2
= 202.4

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