Liquidation Value Homework Help

Liquidation Value

This approach to valuation of shares is based on the liquidation value per share (LVPS).

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If the total assets of Alert Ltd can be liquidated for Rs 52.5 crore, its LVPS = (Rs 52.5 crore - R.. 45 crore) + 10,00,000 = Rs 75. The minimum value of the firm would be Rs 75 per share. The LVPS is a more realistic measure than book value, But it ignores the earnings power of the assets of the firm. Moreover, it is difficult to estimate the liquidation value of a going concern. For these reasons, the LVPS is also not a true proxy of the true investment value.

Posted by: andy

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