Problem and solution of Valuation of shares

Calculation of Intrinsic value, Yield Value, and Fair value of valuation of shares.

1. Haribhai V. Desai College, Pune 411002 Department of Commerce E- Content Development Cell Third Year B. Com. Valuation of Shares Designed by Dr. Yashodhan Mithare

2. Learning Objectives To understand methods of Valuation of Shares To understand calculation of intrinsic value method To understand steps in calculation of Yield Value Method To understand calculation of Fair Value

3. Steps to calculate intrinsic Value of Shares Take the total of assets (Adjustment Value) Deduct the total of all third party liabilities Answer is Net Valuation of Business Divide Net Valuation by number of equity shares Answer is Value Per Share as per Intrinsic Value Method

4. Valuation of Shares as per Intrinsic Value Method Value Per Share = Net Assets No. of Equity Shares Value Per Share = 3,70,000 40,000 shares Value Per Share = Rs. 9.25 Total Value of Assets : Goodwill 50,000 Fixed Assets 3,50,000 Current Assets 2,00,000 Total 6,00,000 Total Value of Liabilities : Current Liabilities 2,30,000 2,30,000 Net Valuation (6,00,000 – 2,30,000) 3,70,000 Total

5. Steps to calculate Yield Value of Shares Calculate Average Profit from given information Deduct General Reserve as per the adjustment Calculate super profit (Profit ÷ Normal Rate of return X 100) Divide Profit by number of equity shares Answer is Value Per Share as per Yield Method

6. Valuation of Shares as per Yield Value Method