S Ltd is considering buying the business of R Ltd the final accounts of which for the last 3 years were as follows: (in image) S ltd wishes the offer to be based upon trading cash flow rather than book profits. Trading cash flow is the cash received from debtors less cash paid to creditors and for business expenses (excluding depreciation), together with an allowance for average annual expenditure on fixed assets of Rs 15,000 per year. The cost of capital is 12.5 %. The actual expenditure on fixed assets is to be ignored and also any cash received or paid out on the issue or redemption of shares or debenture. S Ltd wishes the trading cash flow to be calculated for the years 2011, 2012, 2013 and for these to be combined using weights of 30% for 2011, 20% for 2012 and 50% for 2013 to given an average annual trading cash flow.
S Ltd is considering buying the business of R Ltd the final accounts of which for the last 3 years were as follows: (in image) S ltd wishes the offer to be based upon trading cash flow rather than book profits. Trading cash flow is the cash received from debtors less cash paid to creditors and for business expenses (excluding depreciation), together with an allowance for average annual expenditure on fixed assets of Rs 15,000 per year. The cost of capital is 12.5 %. The actual expenditure on fixed assets is to be ignored and also any cash received or paid out on the issue or redemption of shares or debenture. S Ltd wishes the trading cash flow to be calculated for the years 2011, 2012, 2013 and for these to be combined using weights of 30% for 2011, 20% for 2012 and 50% for 2013 to given an average annual trading cash flow.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
S Ltd is considering buying the business of R Ltd the
years were as follows:
(in image)
S ltd wishes the offer to be based upon trading cash flow rather than book profits. Trading cash flow is the cash received from debtors less cash paid to creditors and for business expenses (excluding
the issue or redemption of shares or debenture.
S Ltd wishes the trading cash flow to be calculated for the years 2011, 2012, 2013 and for these to be combined using weights of 30% for 2011, 20% for 2012 and 50% for 2013 to given an
average annual trading cash flow.
Transcribed Image Text:Profit and loss account for the 3 years ended 31st Dec (Rs.)
2013
Particulars
2012
2011
200,000
(100,000)
(80,000)
(12,000)
8000
190,000
(95,000)
(80,000)
(13,000)
2000
Sales
224,000
(112,000)
(82,000)
(14,000)
16,000
Material Consumed
Business Exp
Depreciation
Net Profit
Balance sheet as at 31st Dec (Rs.)
Particulars
Fixed Assets (at cost)
Less: Depreciation
2010
2011
2012
2013
100,000
(70,000)
Net fixed Assets 30,000
16,000
21,000
32,000
1000
120,000
(82,000)
38,000
17,000
24,000
11,000
500
140,000
(95,000)
45,000
18,500
180,000
(109,000)
71,000
21,000
28,000
13,200
Stock in Trade
Sundry Debtors
Cash in hand & at Bank
26,000
28,000
2000
Prepaid Expenses
1000
Total Assets 100,000
Equity capital
Share premium
General reserves
90,500
50,000
119,500
70,000
5000
134,200
70,000
5000
50,000
42,000
16,000
20,000
11,000
3000
24,000
26,000
Debentures
Sundry creditors
Accrued exp
13,000
3500
14,000
4500
14,000
3200
Total liability 100,000
95,500
119,500
134,200
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