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Valuation of shares

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www.safeecollege.com

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Transcript

  • 1. Valuation Of Shares
    • Earning Capitalization
    • Method (ECM)
    • Dividend Capitalization
    • Method
    • Fair Value Method
    • Fair Value = Intrinsic Value + ECM
    • 2
  • 2. Calculation Of Value on Intrinsic Value Basis
    • Also Known as :
    • Intrinsic Value
    • Net Asset Value
    • Break up Value
    • Net Worth Per Share
    • Book Value Per Share
  • 3.
    • Valuation of Intrinsic Value :
    • Sundry Assets ----------
    • Less: Sundry Liability ----------
    • Add: Goodwill ( Revalued) ----------
    • Add: Non Trade Investment ----------
    • Less: Preference Share Capital and
    • Dividend in Arrear ----------
    • Add: Notional Calls ----------
    • Net Asset For ESH ======
    • Divided By No. of Shares ----------
    • Intrinsic Value ======
  • 4.
    • Note: Goodwill will always be calculated for the purpose of Intrinsic Value
    • Note: Sundry Asset and Liability are after :
    • Revaluation
    • Rectification
    • New Policy etc.
    • Note: Always Calculate Intrinsic Value on Ex Dividend Basis.
    • Intrinsic Value = Int. Value + Div Per
    • Cum Dividend Ex Dividend Share
  • 5.
    • Earning Yield Method / Earning Capitalization Method / Yield Method
    • = Earning Rate × Paid Up Share Capital Per Share
    • NRR
    • Future Marketable - Non Trade Inv.
    • Profit Income Net of tax
    • Earning Rate = x 100
    • Share Capital
    • Use : Where large no. of shares is to be valued ( Big Lots)
  • 6. 2. Dividend Capitalization Method
    • Dividend Rate x Paid up share cap per share
    • Normal Rate of return
    • Dividend Rate is rate of Dividend Company is expected to pay.
    • Normal Dividend Rate is NRR.
    • This method is applied for Small Lot of shares .
  • 7. 3. Fair Value Method
    • Fair Value = Intrinsic Value + ECM
    • 2
    • This method is to be used for valuation of shares for controlling Interest.
  • 8. How to Calculate Normal Rate of Return
    • NRR of Industry is taken as Base ---------
    • Add: Risk Factor ½ % Assumed ---------
    • ( Risk Premium for each risk)
    • Ke of Companies NRR
    • Risk Factors:
    • Dividend Track Record
    • Dividend Coverage Ratio
    • Asset Backing Ratio
    • Debt Equity / Capital Gearing Ratio
  • 9.
    • Equity Dividend Coverage Ratio =
    • PAT – Preference Dividend with CDT
    • Equity Dividend
    • Preference Dividend Coverage Ratio =
    • PAT
    • Preference Dividend
  • 10.
    • Asset Backing Ratio =
    • Intrinsic Value Per Share
    • Paid up value per Share
    • Capital Gearing Ration =
    • Debt + Preference Share Holder
    • Equity – Losses – Preference Share Holder
    • Debt Equity =
    • Debt
    • Equity
  • 11. 4. Valuation of Business
    • It can be on the basis of:
    • Shares
    • Cash Flows
    • Value as per Share = Number of × Value of
    • Shares Shares
    • Value per share can be : MP , Intrinsic Value , Fair Value , ECM , DCM
    • Value of Business on Cash Flow Basis =
    • Cash flow of Business × Discount Factor