Valuation of shares-- solutions to the problems

Answer 2.                                                                 For questions click here

Total capital Employed= 949000(-)95000
                                      =854000

normal profit = 7% of 854000
                       =59780

Average ne profit =62560

Super profit = 62560(-) 59780
                   =2780

Goodwill= 5*2780
               =13900


Total tangible asset =949000
Goodwill                =13900
total asset                =962900

less: total liability =95000

Asset available for shareholder= 962900(-)95000
                                                 =867900

less: preference share capital=500000
        preference share dividend=30000


Asset available for Equity shares holders= $337900

number of equity shares= 30000

intrinsic value per share = 337900/30000
                                        =11.26

(preference share dividend are assumed to be in arrear)