From the following particulars, calculate the fair value of an equity share : (1) Share capital: 50,000, 10% Preference shares of ₹100 each fully paid up 5,00,000 Equity shares of ₹10 each fully paid up (2) External liab

Intrinsic value of an equity share Particulars Amount (₹) Preference Share Capital 50,00,000 Equity Share Capital 50,00,000 Reserve and Surplus 5,00,000 External Liabilities 7,50,000 Gross Assets 1,12,50,000 Less: External Liabilities 7,50,000 Assets available to shareholders 1,05,00,000 Less: Amount belong to Preference Shareholders (50,00,000) Net Assets available to Equity Shareholders 55,00,000 Intrinsic Value of an equity share = ₹55,00,000 / 5,00,000 shares = ₹11 per share Valuation of an equity share on yield method basis: Average Profit earned after tax = ₹8,80,000 Rate of Dividend = (₹8,80,000 * 100) / ₹50,00,000 = 17.60% Yield value of each share: = (Rate of Dividend / Normal Rate of Return) * Paid up value of each share = (17.60 / 11) * 10 = ₹16 per share Fair Value of each share = (Intrinsic Value + Yield Value) / 2 = (11 + 16) / 2 = ₹13.50 per share