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how to calculate net assed value (liquidation basis) is there any formula for it?
it is asked in december 2012 Q4 GWw companyNet asset value (liquidation basis)
Current net asset value (NAV) = 91·0m + 8·3m – 7·1m – 25·0m = $67·2 million
Decrease in value of non-current assets on liquidation = 86·0m – 91·0m = $5 million
Increase in value of inventory on liquidation = 4·2m – 3·8m = $0·4 million
Decrease in value of trade receivables = 4·5m x 0·2 = $0·9 million
NAV (liquidation basis) = 67·2m – 5m + 0·4m – 0·9m = $61·7 millionhow is this calculated??
There is no formula for the asset value.
It is just the value of the assets, less the liabilities.
In this question, you have the balance sheet and so you know the book value of the assets and liabilities.
The question also tells you the value of the assets if there is liquidation.You can get the liquidation value in two ways – either you can do what the examiner has done in his answer and take the balance sheet values and adjust for the changes mentioned in the question.
Alternatively (but just as good) you can list the assets and liabilities at their liquidation values from the question.So….assets: non-current 86.0; inventory 4.2; receivables 80% x 4.5 = 3.6. So total assets = 86+4.2+3.6 = 93.8
Liabilities: bonds 25.0; current liabs. 7.1. So total liabilities = 25+7.1 = 32.1So the net assets = 93.8 – 32.1 = 61.7M
Again. it doesn’t matter which way you calculate the figure – I prefer the way above to the examiners way 🙂
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