PN Limited submits the following details for the financial year ended on 31st March 2025: Number of Equity Shares 1,50,000 Current market price per…

CA Final · Advanced Financial Management · PYQS · September 2025
PN Limited submits the following details for the financial year ended on 31st March 2025: Number of Equity Shares 1,50,000 Current market price per share 12 10% Debts 2,00,000 Cash and Cash Equivalents 5,00,000 Gross Profit 12,00,000 Indirect Expenses (Excluding Depreciation & Interest) 5,00,000 Depreciation 30,000 Risk-free rate of return 7% Market rate of return 16% Beta of the Company 0.8 Applicable Tax Rate 20% On the basis of above details, you are required to calculate the following: (i) Cost of Equity of the company using CAPM. (ii) Earnings Per Share (EPS) of the company. (iii) Equity Value of the company if applicable EBIDTA multiple is 4. (iv) Enterprise Value of the company. Calculation up to 2 decimal points.

Suggested Answer and Working Notes:

(i) Cost of Equity using CAPM 7% + 0.8(16% - 7%) = 14.20% (ii) Earning Per Share (EPS) (₹) Gross Profit 12,00,000 Less: Indirect Expenses 5,00,000 EBIDTA 7,00,000 Less: Depreciation 30,000 6,70,000 Less: Interest on Debt (10% on 2,00,000) 20,000 6,50,000 Less: Tax @ 20% 1,30,000 Profit After Tax (PAT) 5,20,000 Number of Equity Shares 1,50,000 Earnings Per Share (EPS) 3.47 (iii) Equity Value of the Company EBITDA 7,00,000 EBITDA multiple 4 Capitalized Value 28,00,000 Less: Outstanding Debts 2,00,000 Equity Value 26,00,000 (iv) Enterprise Value of company Number of Equity Shares 1,50,000 Current Market Price (CMP) 12 Market Capitalization 18,00,000 Add: Outstanding Debts 2,00,000 Less: Cash and Cash Equivalent 5,00,000 Enterprise Value 15,00,000

Topics: Business Valuation

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