Cepantas Sdn Bhd is in the courier business. It owns an office building and 200 motorcycles to deliver goods around Klang valley. As at 31 December 2020, the carrying amount of the assets, measured at the cost model, are as follows: RM Office building 600,000 Motorcycles 200,000 Delivery bags, helmets 15,000 Total carrying amount 815,000 The building has a current market price of RM800,000 as a stand-alone asset. The motorcycles, delivery bags and helmets each have no or little market value as a stand-alone asset. The business generates an after-tax profit of RM500,000 per year and this profit level is expected to be maintained in the future periods due to increase needs of delivery services caused by Covid-19 pandemic. The average price-earnings ratio (P/E) of Malaysian listed courier companies is 6 times. Required: a) Calculate the value of the Cepantas Sdn Bhd’s business by applying a discount of P/E ratio of one-third. b) Using your answer in (a) above, determine the fair value of each asset. c) Explain the above valuation of property, plant and equipment in accordance with MFRS 13, Fair Value.
Cepantas Sdn Bhd is in the courier business. It owns an office building and 200 motorcycles to deliver
goods around Klang valley. As at 31 December 2020, the carrying amount of the assets, measured at
the cost model, are as follows:
RM
Office building 600,000
Motorcycles 200,000
Delivery bags, helmets 15,000
Total carrying amount 815,000
The building has a current market price of RM800,000 as a stand-alone asset. The motorcycles,
delivery bags and helmets each have no or little market value as a stand-alone asset. The business
generates an after-tax profit of RM500,000 per year and this profit level is expected to be
maintained in the future periods due to increase needs of delivery services caused by Covid-19
pandemic. The average price-earnings ratio (P/E) of Malaysian listed courier companies is 6 times.
Required:
a) Calculate the value of the Cepantas Sdn Bhd’s business by applying a discount of P/E ratio of
one-third.
b) Using your answer in (a) above, determine the fair value of each asset.
c) Explain the above valuation of property, plant and equipment in accordance with MFRS 13,
Fair Value.
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