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COMPUTATION OF INCOME

INCOME FROM EXHIBITING THE PICTURES:

         

Class

No. of .Seats

Rate Rs.

Collection per show Rs.

I Class

250

10.00

2500.00

II Class

300

7.00

2100.00

III Class

250

5.00

1250.00

 

 

Total

5850.00

 

Collection Per show for full occupancy

  •  

Rs. 5850.00

Collection for 4 shows of full occupancy

  •  

Rs. 23400.00

Average occupancy percentage

  •  

60 %

Average Collection Per day 0.6 x 23400

  •  

Rs. 14040.00

Average Collection per year 14040 x 365

  •  

Rs. 51,24,600.00

Less Entertainment Tax 40% paid to the Govt

  •  

Rs. 20,49,840.00

Gross Annual Income from exhibiting the pictures

  •  

Rs. 30,74,760.00

 

  • Say

Rs. 30,75,000.00

         
Income from other Sources (Per Annum):

  • Advertisement Reels Average 3 Nos. @
    Rs. 200 per week
  •  

Rs.   31,200.00

  • Advertisement Slides

     Average 10 Nos. @ Rs. 50 per month

  •  

Rs.    6,000.00

  • Showcases rent @ Rs. 500 per month
  •  

Rs.    6,000.00

  • Rent from Wall Display, @ Rs. 400 per month
  •  

Rs.   12,000.00

  • Rental Income from stalls, Car Parking @ Rs. 250 per day
  •  

Rs.   91,250.00

  • Interest on deposits 15% of 1,00,000
  •  

Rs.   15,000.00

  • Miscellaneous Income
  •  

Rs.      6,500.00

Total Income

  •  
Rs. 1,67,950.00

Say

  •  
Rs. 1,68,000/-

 


Total Income:

Income from exhibiting the shows

  •  

Rs. 30,75,000.00

Income from other sources

  •  

Rs.   1,68,000.00

Total Gross Income

  •  

Rs. 32,43,000.00

COMPUTATION OF EXPENSES:

        Preliminary Expenses:

Film Hire Charges to the distributors @ an average 50% (0.50 x 30,75,000)

  •  

Rs. 15,37,500.00

Hire Charges to Indian News Reel at 1% 90.01 x 30,75,000)

  •  

Rs.      30,750.00

Tax of sales Tax Department for exhibiting Slides and Reels at 60 paise/ slide/show (13 x 0.60 x 4 x 365)

  •  

Rs.      11,388.00

Total

  •  

Rs. 15,79,638.00

Say

  •  

Rs. 15,80,000/-

Working Expenses:

Establishment charges at an average of 10,000/month

  •  

Rs. 1,20,000.00

Consumables at Rs. 700/month

  •  

Rs.     8,400.00

Electricity @ Rs. 2,500/month

  •  

Rs.   30,000.00

Generator Expenses @ Rs. 500/month

  •  

Rs.    6,000.00

Stationery, Printing, Publicity, Office Expenses @ Rs. 2000/month

  •  

Rs.  24,000.00

Travelling and Conveyance @ Rs. 1,500/ month

  •  

Rs.  18,000.00

Telephones and Posts @ Rs. 500/month

  •  

Rs.    6,000.00

Railway Freight @ Rs.100/month

  •  

Rs.    1,200.00

Insurance Premium

  •  

Rs.    3,000.00

License Fee – Collectorate, Electrical Certificate, Stability Certificate – Average /year

  •  

Rs.    5,000.00

Entertainment to Guests

  •  

Rs.      900.00

Subscription to the associations

  •  

Rs.      300.00

Property Tax

  •  

Rs.   5,600.00

Profession Tax

  •  

Rs. 1,250.00

Miscellaneous

  •  

Rs.    950.00

Total

  •  

Rs. 2,30,600.00

Repairs & Depreciation:

Depreciation to Machinery

  •  

Rs.

15,000.00

Depreciation to Building

  •  

Rs.

10,000.00

Maintenance Expenses

  •  

Rs.

28,000.00

Furniture

  •  

Rs.

5,000.00

Total

  •  

Rs.

58,000.00

Owner’s Profit:


15 % of Rs.32,43,000
  •  

Rs.

4,86,450.00

Total Expenses:

Preliminary Expenses

  •  

Rs.

15,80,000.00

Working Expenses

  •  

Rs.

2,30,000.00

Repairs and Depreciation

  •  

Rs.

58,000.00

Owner’s Profit

  •  

Rs.

4,86,450.00

Total

  •  

Rs.

23,54,450.00

Profit


Gross Income
  •  

Rs.

32,43,000.00

Total Expenses

  •  

Rs.

23,54,450.00

Profit

  •  

Rs.

8,88,550.00

Capitalisation:

Tangible Profit @ 75% of Rs. 8,88,550/-

  •  

Rs.

6,66,413.00

Intangible profit @ 25% of Rs. 8,88,550

  •  

Rs.

2,22,137.00

Capitalise Tangible Profit @ 12%

  •  

Rs.

6,66,413 x

 

  •  

Rs.

55,53,442.00

Capitalize Intangible Profit @ 14%

  •  

Rs.

2,22,137 x

 

  •  

Rs.

15,86,693.00

Total (5553442 + 1586693)

  •  

Rs.

71,40,135.00

Say

  •  

Rs.

71,40,000.00

Assessed Value of the Above Cinema Theatre by Adopting Profit Method

  •  

 

Rs.

 

71,40,000.00

DIRECT COMPARISON METHOD:

      Apart from the above four methods, a valuer can estimate the present worth/ market value of property consisting of land & Building by adopting comparable sale instances of the composite rate. The procedure is discussed here.
Under the comparison of properties, no two properties are not same. Hence to get exact comparison of the properties is difficult. But here realistic value can be obtained following some factors to be considered in this method.

  1. The final unit composite rate is to be arrived at after comparing sufficient  number of sale instances.
  2. Comparison must not be based upon the sale agreements or mere offer to buy/sell.
  3. Comparison must not be based upon the forced sale value, distressed value, as these will normally give only a lower value.
  4. Comparison must not be based upon the desired value, value yielded due to absolute necessity as these will normally give a comparatively more value.
  5. Abnormally high or insignificantly low value properties must not be considered. Sale to relatives or cooked up sale will not be a suitable case for good comparison.
  6. Genuine transaction must have been carried out in the open market.
  7. The sale transaction must have been carried out in the open market.
  8. It is preferable that the period of sale instances must be nearer to the period of valuation of the property under valuation.
  9. Composite rate of bigger property must not be based upon sale instances of a smaller property as far as possible (and vice versa).
  10. It is preferable to compare sale instances of residential buildings for the purpose of valuation of a residential buildings and likewise.
  11. The unit of comparison must be the same for the properties to be compared. If the carpet area is the basis for property under comparison, the same unit must also be the basis for valuation of the subject property.
  12. Premises (similar in character) should more or less be similarly situated in the same locality with same type of user.
  13. Location of premises with respect to floor and its position on the floor specially for road view etc. must be similar.
  14. Provision to construct further floors must be a factor to be considered.
  15. The extent of area must be comparable.
  16. Factors like encumbrance free title deeds involved in the transaction and the nature of occupation (whether vacant, tenanted. Encroachment etc.,) must be considered.
  17. When the market Value is to be determined on the basis of sales of land in the neighbourhood with same character, it is opined that the potential value need not be separately added because such sales cover the potential value also.
  18. The comparable property must be inspected thoroughly with regards to:
    1. Accommodation provided – whether Residential or Commercial
    2. Architectural design – Whether conventional or modern.
    3. Quality of construction – whether superior, ordinary or inferior.
    4. Quality of materials used.
    5. Type of Construction
    6. Parking facilities.
    7. Amenities – Whether bare minimum or  more.
    8. Specification – whether rich / ordinary/ medium.
    9. Occupants – whether vacant possession or tenanted.
    10. Rent fetching – whether the property fetches more rent or less rent comparatively.
    11. Return frontages – whether property having a single road or more roads and if so-whether width or road is less or more.
    12. Locational Advantage

PROCEDURE OF VALUATION

It consists in comparing the property under valuation with the more or less similar property in the locality, make suitable adjustments in the rate if specification varies and there after arriving at a suitable composite rate per unit area.

  1. Assess the composite rate of the property under comparison
  2. Adopt this rate as the basic rate for the property under Valuation.
  3. Make suitable adjustments for :
    1. Superior /inferior specification and depreciation
    2. Extra Amenities
    3. Locational advantage
    4. Factors favouring extra value
    5. Factors affecting less value, etc., as discussed.
      1. If the land is vast, and the plinth area of the building is less do the valuation:
      2. For building & appurtenant land, adopt the composite Rate.
      3. For excess land, adopt the prevailing unit land rate.
      4. Add both to arrive at a realistic value.
        1. As far as possible, it is better to compare with a property recently transacted. If much earlier sale instances are to be compared inevitably due to non-availability of recent sale instances, then the composite rate must be suitably increased depending upon the escalation trend in the locality. However if the market trend is stable, the same rate can be considered, of course depending upon the other local condition. Valuer must be a good judge.

REFERENCES:

  1. B. Kanagasabapathy, - Practical Valuation Volume I, II, III.
  2. Shrikanth Vasanth Joglekar, Mumbai Publications 1993-94, Valuation – Revaluation   a New Vista Its Impact on Finance Everyone’s Concern.
  3. C.H. Gopinath Rao, Valuation Practice of Immovable Properties
  4. B. Kanagasabapathy, Fair Rent Manual
  5. B. N. Dutta, Estimating and costing.
  6. Journals of Institution of valuers – New Delhi