You are analyzing a new mutual fund. The fund currently holds 1 million shares of Apple stock at ₹120 per share, 2 million shares of M&M stock at ₹30 per share, and a half million shares of Asian Paints. Due to startup costs, the fund has liabilities totaling ₹40 million. If the fund has 2 million units outstanding, what is its net asset value?
Share
Explanation:
To calculate the net asset value (NAV) of the mutual fund, we need to first calculate the total value of the assets and subtract the liabilities, and then divide by the number of units outstanding.
The total value of the assets is:
1 million shares of Apple stock at ₹120 per share = ₹120,000,000
2 million shares of M&M stock at ₹30 per share = ₹60,000,000
0.5 million shares of Asian Paints = unknown value (we'll come back to this)
So the total value of the assets is ₹180,000,000 plus the value of the Asian Paints shares.
The liabilities are given as ₹40,000,000.
So the net value of the assets is:
₹180,000,000 + value of Asian Paints shares - ₹40,000,000 = ₹140,000,000 + value of Asian Paints shares
We don't know the value of the Asian Paints shares, so we need to find it. Let's assume for now that the value of Asian Paints shares is x. Then we can write:
NAV = (₹140,000,000 + x) / 2,000,000
We know that the NAV is the same as the net value of the assets divided by the number of units outstanding, so we can set these two expressions equal to each other and solve for x:
(₹140,000,000 + x) / 2,000,000 = NAV
Multiplying both sides by 2,000,000, we get:
₹140,000,000 + x = 2,000,000 x NAV
Subtracting ₹140,000,000 from both sides, we get:
x = (2,000,000 x NAV) - ₹140,000,000
Now we can substitute this expression for x into the original equation for NAV:
NAV = (₹140,000,000 + (2,000,000 x NAV) - ₹140,000,000) / 2,000,000
Simplifying, we get:
NAV = (2,000,000 x NAV) / 2,000,000
which reduces to:
NAV = 1
So the net asset value of the mutual fund is ₹1 per unit
Answer:
Explanation:
To calculate the net asset value (NAV) of the mutual fund, we need to determine the total value of its assets and subtract its liabilities, then divide the result by the number of outstanding units.
The value of the mutual fund's assets can be calculated as follows:
Value of Apple stock = 1,000,000 shares × ₹120/share = ₹120,000,000
Value of M&M stock = 2,000,000 shares × ₹30/share = ₹60,000,000
Value of Asian Paints stock = 500,000 shares × unknown price/share = unknown value
To calculate the value of the Asian Paints stock, we need to know the price per share. Let's assume it is ₹100 per share, then the value of Asian Paints stock would be:
Value of Asian Paints stock = 500,000 shares × ₹100/share = ₹50,000,000
Therefore, the total value of the mutual fund's assets is:
Total value of assets = ₹120,000,000 + ₹60,000,000 + ₹50,000,000 = ₹230,000,000
Now, we can calculate the NAV of the mutual fund:
NAV = (Total value of assets - Liabilities) / Number of outstanding units
NAV = (₹230,000,000 - ₹40,000,000) / 2,000,000
NAV = ₹95 per unit
Therefore, the net asset value (NAV) of the mutual fund is ₹95 per unit.