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Hi sir, i have watched your tutorial on this topic.
However, i have try one question and got some confusion. The question has asked to calculate using an asset-based valuation, what is the lowest value that Mick should attribute to T Co?
$000
Non-current assets 100
Receivables 40
Total Assets 140Equity
Ordinary shares 20
Reserves 37
Bank loan 83
Total Liabilities 140Notes:
1. Non-current assets consist of computers, fixtures and fittings and motor vehicles. It is estimated that these could be sold for $45,000
but would cost $120,000 to replace.2. If liquidated, only 80% of receivables would be realised and closure costs would amount to $10,000.
3. It has been estimated that the ‘Angry Cats’ name could be sold for $200,000.
The answer given is :
NCA $45,000 + Receivables $32,000 + Patent name $200,000 – Closure cost $10,000
= $267,000I would like to ask why the given answer did not remove bank loan of $83,000 ( as to calculate the asset-based valuation is Total Asset – total Liabilities)
Same goes when calculate the maximum value ( which simply ignore bank loan too)
I hope you can clarify it to me :/
Thank you so much sir for your time 🙂If Mick was taking over responsibility for the bank loan then you would subtract it from the $267,000. However the assumption here is that he is not taking over the responsibility and that therefore T will have to pay it off out of the proceeds of the sale.
Thank you so much sir for the explanation:)
However, i’m so sorry sir but how can we assume that he is not taking over the responsibility of that bank loan, because I have try multiple questions before but theres no such question like this (did not need to subtract the bank loan). It such a new knowledge to me 🙂
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