- 2070 Magh · 8 marks
Valuation of a cinema hall (land Rs 5 crore)
Short answer
Annual gross income Rs2,00,00,000; total outgoings Rs93,36,443 including machinery sinking fund Rs86,443; net income Rs1,06,63,557. Land interest Rs40,00,000 leaves Rs66,63,557; capitalized with dual-rate YP 12.449 (8%, 10%, 60 years) gives Rs8,29,52,790; add land Rs5,00,00,000; value about Rs13.30 crore.
Workout the value of a Cinema hall from the following data.
i) Cost of Land = Rs 5 crore ii) Gross income = Rs. 2 crore iii) Operating Cost = 40% of Gross income iv) Repair and Maintenance of machineries = 5% of Capital Cost where capital cost is Rs. 40 lakh v) Repair of Hall = 5% of Gross income vi) Sinking fund for machineries whose life is estimated 25 years @ 4% after allowing 10% scrap value. vii) Insurance premium = Rs 50000 per year viii) Assume years purchase for 60 years at 8% and redemption of capital at 10%.
Method: income method with a dual-rate YP. The interest on land is deducted from the net income (land is not redeemed), the remainder is capitalised, and the land is added.
Annual outgoings
| Item | Calculation | Rs |
|---|---|---|
| Operating cost | 40% × 2,00,00,000 | 80,00,000 |
| Repair and maintenance of machines | 5% × 40,00,000 | 2,00,000 |
| Repair of hall | 5% × 2,00,00,000 | 10,00,000 |
| Insurance premium | 50,000 | |
| Sinking fund for machinery | see below | 86,443 |
| Total outgoings | 93,36,443 |
Sinking fund for machinery: depreciable amount = 90% × 40,00,000 = Rs 36,00,000, n = 25 years, i = 4%:
Net income = 2,00,00,000 − 93,36,443 = Rs 1,06,63,557
Interest on land (8% of 5,00,00,000) = Rs 40,00,000 Net income from building and plant = 1,06,63,557 − 40,00,000 = Rs 66,63,557
Year's purchase (60 years, 8%, redemption 10%):
Capitalised value of building and plant = 66,63,557 × 12.449 = Rs 8,29,52,790
Value of cinema hall = 8,29,52,790 + 5,00,00,000 = Rs 13,29,52,790
Answer: Value of the cinema hall is about Rs 13.30 crore.
✓ Answer checked by Claude Opus 5.5 (high effort)
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