MCQ

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May 4, 2018 at 6:26 pm #450111
humai
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The owners of a private company wish to dispose their entire investment in the company. The company has an issued
share capital of $1m of 0.5 nominal value ordinary shares. The owners have made the following valuations of the
company’s assets and liabilities

NCA (book value) $30m
CA $18m
NCL $12m
CL $10m

The NRV of NCA exceed their book value by $4m. The current assets include $2m of accounts recievable which are thought
to be irrecoverable.

What is the minimum price per share which the owners should accept for the company?

Sir I have understood this question and also that we have to use net assets valuation method in this, however the only
thing which is confusing me in this question is that while calculating net assets value they have considered
NRV of NCA instead of the book value. Can you please explain me this?
May 5, 2018 at 8:40 am #450171
John Moffat
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Book values do not represent the ‘true’ value of the assets. If we have the information (as we do here) then using realisable values is much more representative of the ‘true’ value.
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