2016-2017 Solution

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Ray Ltd 1000000 capital value of amar

value of chand
Amar Chand

Fair value Fair value


NAV method Avg of FCFF and Nav

Valuation of Balu Ltd Valuation of Amar Ltd

Assets at realisable value Assets at realisable value

free hold property 290 free hold property


plant and machinery 410 plant and machinery
current assets 240 current assets
total 940 Inv in Balu Ltd
total
less liability
less liability
12% debentures 0
current liability 230 12% debentures
total 230 current liability
total
NAV 710
NAV per share 14.2 NAV
NAV per share
in 1000 capital proportion of Ray Ltd by each
1208 1208000 515776.08
1134 1134101.63 484223.92
1000000

Valuation of Chand Ltd as per NAV method Calculation of WACC


particulars
Assets at realisable value debt
equity
660 free hold property 530
450 plant and machinery 590
210 current assets 390
568 Inv in Balu Ltd 0 year
1888 total 1510 1
2
less liability 3
4
300 12% debentures 200 5
380 current liability 160
680 total 360

1208 NAV 1150


15.1 NAV per share 17.96875
lculation of WACC
amount wt cost Wt * cost
200 0.238095238095 6.00% 0.01428571
640 0.761904761905 17.25% 0.13142857
840 1 14.57%

FCFF PVF @ 14.57% PV


71 0.872817955112 61.9700748
85 0.761811182766 64.7539505
96 0.664922478724 63.832558
112 0.580356278188 64.9999032
128 0.506545379964 64.8378086
320.394295 VHGP

FCFF 6 135
TV 1575
VSGP 797.8089734439

Value of firm 1118.203268542


initial outlay 400000
life 2
year 1 prob 0.4 cash flow 250000
year 1 prob 0.6 cash flow 300000

CF 250000 CF 300000
amount probability amount probability
120000 0.2 200000 0.4
160000 0.3 250000 0.5
220000 0.5 300000 0.1

120000
0.2

0.4 250000 160000

-400000 0.5 220000

0.6 300000 200000

250000
0.1
300000
Statement of expected NPV
year Cash flow Prob PVF PV of CF 1
1 250000 0.4 0.90909091 227272.727
1 250000 0.4 0.90909091 227272.727
1 250000 0.4 0.90909091 227272.727
1 300000 0.6 0.90909091 272727.273
1 300000 0.6 0.90909091 272727.273
1 300000 0.6 0.90909091 272727.273

0.3

0.4

0.5
year cash flow prob PVF PV of CF 2 total PV joint Prob
2 120000 0.2 0.82644628 99173.5537 -73553.719 0.08
2 160000 0.3 0.82644628 132231.405 -40495.8678 0.12
2 220000 0.5 0.82644628 181818.182 9090.90909 0.2
2 200000 0.4 0.82644628 165289.256 38016.5289 0.24
2 250000 0.5 0.82644628 206611.57 79338.843 0.3
2 300000 0.1 0.82644628 247933.884 120661.157 0.06
Expected NPV
-5884.2975207
-4859.5041322
1818.18181818
9123.96694215
23801.6528926
7239.66942149
31239.6694215
div paid
no of shares 300000 price 1 158.75
MP 150 div amt 3000000
div 10 ret earn 1000000
ke 12.50% inv req 5000000
net income 4000000 old shares 300000
inv 6000000 new shares 31496.063
total 331496.063
value 52625000
div not paid
168.75
0
4000000
2000000
300000
11851.8519
311851.852
52625000
year 2015 year 2016
units 50000 units
sp 250

RM 6250000 125 RM
labour 1750000 35 labour
OH 2000000 40 OH
total cost 10000000 200 total cost
profit 2500000 50 20 profit
sales 12500000 250 100 sales

current assets units


raw material 40000
WIP 40000
FG 40000
Debtors 40000
cash
total CA

current liab units


O/s wages 40000
creditors 40000
total CL

Working capital
add MOS
final WC
40000

5000000 125
1288000 32.2
1472000 36.8
7760000 194 80
1940000 48.5 20
9700000 242.5 100

cost pu time amount


125 0.16666667 833333.333
159.5 0.08333333 531666.667
194 0.16666667 1293333.33
194 0.08333333 646666.667
75000
3380000

cost pu time amount


32.2 0.04166667 53666.6667
125 0.16666667 833333.333
887000

2493000
124650
2617650

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