Asset based valuation - example, Finance Basics

Asset Based Valuation - Example

K and K Company Limited is planning to absorb three other companies so as to realize its sales records of Sh.500, 000 per annum.  Its accountants have advised the company to keep such a size which will enable its shares to sell at a minimum price about Sh.16. last published balance sheets of the company is shows as given:

                                                                  Sh.'000'

Ordinary shares of Sh.10 each                    50,000

Reserves                                                    65,000

Current liabilities                                        40,000

Total                                                          155,000

Assets:                                                        Sh.

Fixed assets                                                80,000

Current assets                                            75,000

Total                                                          155,000

For the last 5 years profits were as follows:

     Sh.'000'

1.  9,000

2.  6,000

3.  10,000

4.   8,000

5.   17,000

P/E ratio applicable is 12:1

Estimate the value of the business indicating the lowest offer price and the highest offer price and the share value thereof if it would be viable to take on the three companies if it's to maintain this share value.

P/E Ratio Method

P/E = 12:1   Average profits = 10,000,000

Therefore Value of business  = 10,000,000 x 12

                                                = Sh.120,000,000

Value of shares = Sh.120 million / 5 million shares

                          = Sh.24

Assets Method

                                                Sh.'000'

Assets                                     155,000

Less: Current liabilities          [40,000]

                                                115,000                                                              

Value of shares             =        Sh.115M/5M shares

                                       =         Sh.23

Where like: Po = Price of ordinary shares

                   d   = Dividend at the ending of year one

                    P1 = Price of the share at the ending of one year.

Posted Date: 1/31/2013 2:11:26 AM | Location : United States







Related Discussions:- Asset based valuation - example, Assignment Help, Ask Question on Asset based valuation - example, Get Answer, Expert's Help, Asset based valuation - example Discussions

Write discussion on Asset based valuation - example
Your posts are moderated
Related Questions
Book Value and Market to book value per share Book value per share (BVPS)  = Net worth Equity/No. of ordinary shares It is called also liquidity ratio that show

give an introduction about stock exchage in india,,includig BSE

Different Risk-profile - Shareholders and Management Shareholders will generally prefer high-risk-high return investments while they are diversified that is they have many inv

Measuring Business Performance Definition Financial analysis is a process via that finance identifies the company's financial performances with comparing the entities in

flotation cost of 15% for bond, bonds 8%,$1,000 par value, 16 year maturity

Stone Container is a major producer of cardboard boxes. Stone Container has $10M in outstanding equity. In addition, it has $2M in outstanding debt. The debt is a ten-yearmortgage

Sources of Funds - Finance Venture capital, with combining risk financing along with marketing assistance and management, could become an effective instrument in fostering dev

Define Meaning of Investment Meaning of Investment: Investment involves making of a sacrifice in the present with hope of deriving future advantages. Investment has many

Describe the structure of financial systems with financial markets, securities and financial intermediaries. By a structural point of view a financial system can be considered

I need help with financial econometric questions, i got stuck in finding answers for my homework, Can you provide engineering level financial econometric homework help? I need expe