Accountancy, asked by rasdeepsingh09, 2 months ago

It is given that net assets available for equity and preference shares amount to Rs.

1,87,000. The paid-up capitals are—10,000 equity shares of Rs. 4 each and 5,000

preference shares of Rs. 10 each. Therefore, value of a preference share will be—​

Answers

Answered by bharatpatadia74
1

Answer:

Problem 14: The issued share capital ofVinayaka Ltd. was Rs. 10,00,000

consisting of 10,000 equity shares of Rs.100 each. The net profits of the

last 5 years were:

Re. 1,00,000; Rs.80,000; Rs. 1,20,000, Rs.1,60,000 and Rs.1,40,000.

Out of the profit, 20% was transferred to reserve. Fair return on capital employed is 12%.

Compute the value of the equity share by yield method.

Solution:

Step1: Calculation of expected profit/ Average profit

Total profit of 5 years=

1,00,000+80,000+1,20,000+1,60,000+1,40,000=Rs.6,00,000

Average profit = 6,00,000/5 Years= Rs.1,20,000

Step 2:Calculation of profit available for equity dividend Rs.

Expected Profit/ Average Profit

Transfer to general reserve:20% of 1,20,000

1,20,000

24,000

Profit available for equity dividend 96,000

Step 3: Calculation of expected rate of return

Profit available for equity dividend

Expected rate of return = x Rs.100

Paid up equity capital

96000 x 100 = 9.6%

1000000

Step 4: Calculation of value of equity share

Expected rate of return

Yield value per share =

Normal rate of return

xPaid up value

Yield value per share 9.60 100 Rs.80D

12%

The expected return is lower than the normal return. So, the value of the

share is lower than the paid up value.

Problem 15: Yellow Ltd. has 10,000 equity shares of Rs.10 each, Rs.8

paid and 1,00,000 6% preference shares of Rs.10 each, fully paid. The

company transters 20% of the profit to general reserve every year Ihe

expected profit (based on past year's performance) before tax is Rs.2,0000YIELD METHOD

Problem 13: Kala holds 5,000 shares in Ginger Ltd. The paid un.

. It is ascertained th

p apital

of the conmpany

is 30,000 equity shares of Re.1 each.

a. normal net profit of such a company

is Rs.5,000 and

on by the

b. the normal return for the type of business carried on h a

Kala requests you to value her shares based on the above figures.

(B.C.S, M.Com., Madras)

company is 8%.

Solution:

Step 1: Calculation of expected rate of return

Profit available for equity dividend

x Rs.100 Expected rate of return =

Paid up equity capital

5,000100 16.67%

30,000

Step 2: Calculation of value of equity share

Yield value per share =

Expected rate of return

x Paid up value

Normal rate of return

16.67% Yield value per share: x 1= Rs.2.08

8%

No. of shares held by Kala = 5,000

Value of shares held by Kala = Rs.2.08 X 5000 = Rs.10,400D

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