Amalgamation doubt

1.Intrinsic value is a measure of value based on the future earnings a company is expected to generate for its investors - it attempts to measure the total net assets a company is expected to build in the future. It is considered the true value of the company from an investment standpoint and is calculated by taking the present value of the earnings (attributable to investors) that a company is expected to generate in the future, along with the future sale value of the company. The idea behind this measure is that the purchase of a stock entitles the owner to his or her share of the company's future earnings. If all of the future earnings are accurately known along with the final sale price, the company's true value can be calculated.

2&3. Intrinsic value can be calculated for equity share holder only. because prefernce share holder having particular percentage of  profits only allowable,, and that profit also before paying equity share holder need to be paid, so what ever profit after payment of Preference dividend all will go to equity share holder only. so equity share holder is the finally going to share what ever profit or loss of the business and also while repayment of capital also preference share holder having preference but  equity share holders only if any thing remaining after payment of all they may get, so  preference share calculating Intrinsic value is not  give correct  vaule, so equity share only having intrinsic value

Thanks

CMA.Ramesh Krishnan

Can you please inter-relate the explanation of  INTRINSIC VALUE calculation and payment to Equity shareholders

Intrinsic value is the value of the business to its owners. Equity shareholders are the owners. preference shareholders are not the owners because they get constant returns. Intrinsic value is the total assets of the company reduced by third party liabilities incl of preference share capital. 

This no need to be inter relate both the Intrinsic value and payment, it was given the reason for non applicable of Intrinsic method for Preference shares. I want clarifiy further. Only Equity share holder dividend &  capital repayment based on the  future earnings capcity of the company, it will vary based on the performance. but Preference shares not having that varrianace in case company in loss they may not get dividend, but in case company earn high profit also, they will get only what percentage fixed. so prefernce share value may be fixed  value  not intrinsic value ,so  only equity share can be calculate Intrinsic value

Hope it clear.

Thanks

CMA.Ramesh Krishnan

THANKS SIR AND ARAVIND

Welcome...

THANKS to both Sir and Aravind.

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