Unit 14, 15 and 16 - Corporate Valuation Numericals

NMIMS – BBA (LLB) – Semester 4 Finance IV
Unit 14, 15 and 16 – Corporate Valuations
UNIT 14, 15 and 16 – CORPORATE VALUATION

Course Outcomes achieved by completing this unit
1. To enable an understanding of Interdisciplinary subjects and integrate

functional areas of finance and management law with an aim to understand
the evaluation process of target companies and the deals’ value, understand
intricacies with respect to company valuation, highlight the relationship
between corporate restructuring and smooth managerial decision making
and to understand corporate restructuring. (PLO3b)
Discounted Cash Flow Technique:
Q 1. Based on the information given by XYZ Ltd., compute its free cash flow and
also value the company based on Cash Flow Approach.
Particulars 2021 2022 2023 2024

Sales / 2,00,000 1,90,000 1,80,000 2,00,000
Revenue
Cost of Goods 1,00,000 95,000 90,000 1,00,000
Sold
Operating 40,000 35,000 35,000 37,000
Expenses
Depreciation 10,000 9,000 8,000 7,000
Interest 8,000 8,000 8,000 8,000
Working 2,500 2,800 3,000 4,000
Capital
Increase
Note: The cost of capital of the enterprise is 10% and the tax rate is 10%.
Compiled for Reference by Only for academic purposes

CS Swapnil Shenvi
1
Q 2.
Following information is given about ABC Ltd

Calculate the free Cash Flow of the enterprise and subsequently calculate the value of
ABC ltd based on Discounted Cash Flow Approach
The cost of capital of the enterprise is 12%
Particulars 2021 2022 2023 2024
Revenue ₹ 2,20,000 ₹ 2,53,000 ₹ 2,90,950 ₹ 3,34,593
Cogs ₹ 1,10,000 ₹ 1,26,500 ₹ 1,45,475 ₹ 1,67,296
Operating exps ₹ 32,000 ₹ 33,600 ₹ 35,280 ₹ 37,044
Depreciation ₹ 12,000 ₹ 10,800 ₹ 9,720 ₹ 8,748
Interest ₹ 5,000 ₹ 5,000 ₹ 5,000 ₹ 5,000
WC increase ₹ 5,200 ₹ 5,824 ₹ 6,523 ₹ 7,306
Earnings Capitalization Method:
Q 3. Company A proposes to buy out Company B. Based on the below mentioned

information with regards to buying, you are required to arrive at the value of
the shares under Earnings Capitalization Method:
1. The average post-maintainable profits of A Ltd. and B Ltd. for the last 4
years is Rs 700 crores and Rs 50 crores respectively.
2. Both the companies envisage a capitalization rate of 10%.
3. Number of shares of A Ltd is 7 crores and that of B Ltd is 1 crore.

CS Swapnil Shenvi
2
Asset Based Approach:
Q 4. Company PQR Ltd proposes to buy out Company MNL Ltd. and the following
information is provided for you to arrive at the value of the shares of both
companies under Net Asset Value Method:
Balance Sheet Rs in crores Rs in crores

Liabilities PQR Ltd MNL Ltd
Paid up share capital 500 100
Equity shares of Rs 100
each
Reserves and Surplus 700 600
Current Liabilities 400 300
Total 1600 1000
Assets
Fixed Assets 900 300
Current Assets 700 700
Total 1600 1000
Both companies have forgotten to record a liability of Rs 100 crores and Rs 500
crores respectively as on the date of the balance sheet.

CS Swapnil Shenvi
3
Q 5. A company has provided the following balance sheet:
Liabilities Amount Assets Amount

Capital 89,00,000 Land 52,00,000
Reserves 56,00,000 Building 78,00,000
Debentures 20,00,000 Machinery 25,00,000
Loans 11,12,000 Furniture 14,00,000
Creditors 12,00,000 Tools 5,00,000
Outstanding 78,000 Debtors 2,40,000
expenses
Inventory 12,00,000
Cash 50,000
1,88,90,000 1,88,90,000
Additional Information:
1. There is appreciation in land of Rs 2,00,000

2. Building lost a wing in highway construction worth Rs 20,00,000
3. Machinery lost in fire Rs 5,00,000
4. Debtors of Rs 14,000 are insolvent
5. Inventory of Rs 2,20,000 became obsolete. Scrap value of the same is Rs 20,000
6. Outstanding expenses of Rs 12000 are now not payable
7. One of the customers lodged a complaint and a sum of Rs 14,000 is due
towards him, which is not recorded in the balance sheet
Find the value of the company by the net asset value method.
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CS Swapnil Shenvi
4

Unit 14, 15 and 16 - Corporate Valuation Numericals

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NMIMS – BBA (LLB) – Semester 4 Finance IV

Unit 14, 15 and 16 – Corporate Valuations

UNIT 14, 15 and 16 – CORPORATE VALUATION

1. To enable an understanding of Interdisciplinary subjects and integrate

Discounted Cash Flow Technique:

Particulars 2021 2022 2023 2024

Compiled for Reference by Only for academic purposes

Following information is given about ABC Ltd

Earnings Capitalization Method:

Q 3. Company A proposes to buy out Company B. Based on the below mentioned

Compiled for Reference by Only for academic purposes

Asset Based Approach:

Balance Sheet Rs in crores Rs in crores

Compiled for Reference by Only for academic purposes

Q 5. A company has provided the following balance sheet:

Liabilities Amount Assets Amount

1. There is appreciation in land of Rs 2,00,000

Compiled for Reference by Only for academic purposes

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