CBF4329 Strategic Financial Management Group Assignment (50 marks) Due date 19 November 2021 Namibia Outdoor Gear P. NOG) orary which manufactures a variety of camping equipment Namibia Wide ANNA sed company on the Namibian Stock Exchange sted in NOG NWAS y asked NOG to wake price that they will be wing to be comowy. Since NOG private company, vacation has to perform. Your group has been the NOG determine the price. The following information has been provided The extract from the statement of financial position on 25 February 2020 was as follows N5000 ASSETS Non-current assets Property 33 000 Pant and equipment 18000 51 000 Current assets Inventory 2000 Debtor 4 000 Cash and cash equivalent 2000 8000 50 000 Totalausets EQUITY AND LIABILITIES Share capital (NS1 ) Non-distributable reserve Retained income Ordinary shareholders equity Non-current liabilities 9% Preference shares Debentures 14000 2000 3000 19 000 15 000 20 000 36.000 Current liabilities Creditors 4 000 Total equity and att 30 000 The following is an extract from the statement of comprehensive income of NOG (Pty) Lid for the past year ending 28 February 2020 as well as a forecast for the next three years Actual Budgeted 2020 2021 2022 2023 NSODO N5000 N5000 N5000 Income 23310 32 100 37 330 43 900 Les Operating costs 6993 12 182 13 792 15 729 Depreciation 2717 4480 4490 4490 Profit before interest and ta Interest (debentures) Profit before tax Tax Profit after 12 500 2.500 10 100 2 101 7 999 15428 2500 12928 2589 10 239 19 048 2.500 16 548 3442 13 100 23 681 2500 21 181 4 400 16 778 Further information: The preference share dividend is currently N51 440 000 and the management of NOG (PTY) Lid has indicated that the current dividend pay out ratio will be maintained in the future Growth in after-tax earnings for 2024 and there is expected to be 6% per annum Depreciation will fluctuate, but for the purposes of the valuation, assume the 2023 charge will continue indefinitely. The NAMRA acknowledges NOG s depreciation policy. You can assume that NOG annually invests the same amount as the depreciation charge in order to maintain and replace current assets The current tax rate is 28% and this is expected to remain constant in the foreseeable future Debentures and preference shares are not redeemable and investors in the market can earn 14% and 10% respectively on these investments The cost of equity of NOG (Ply) Ltd is 19.5%, while the weighted average cost of capital is 16% Required Marks Sub- Total Total Perform a valuation of NOG (Pty) Ltd equity by using the free cash flow technique Total 25 25 25 Question 2 (25 marks) Namibia Investment Consultancy (NIC) is a private company that performas valuations and analysis of financial statements on behalf of private clients Your group has been hired to assist NIC in various taks. Your first task is to analyse the financial statements of Namibia Decorations Limited ("NDL"). Last year, NDL sales revenue increased by 35% but this was a result of a selling price cut of 10%. The bank overdraft of NDL has also significantly increased at the end of 31 December 2020 The following financial information has been presented to you about NDL: NDL Extract Statement of profit of loss for the year anded: 31 Dec 2020 NS000 Revenue 8 100 Cost of goods sold and expenses 3700 Profit before tax 4400 31 Dec 2019 N$000 8 000 2 340 3 660 Page 13 NDL Extract Statement of financial position as at Non current assets Current assets Inventory Trade receivables Cash Total assets 31 Dec 2020 N5000 6400 2450 840 1 460 150 8 850 31 Dec 2019 N$000 5 000 1270 430 640 200 6 270 Share capital and reserves Non-current liabilities - debentures repayable 20:25 Current liabilities Trade payables Bank overdraft Total equity and liabilities 5750 8.80 2 220 1060 1 160 8850 4780 880 610 570 40 6270 (Note that the figures above are in N5000s-thousands) Required Marks Sub- Total total 12 12 10 22 2.1 Calculate twelve relevant ratios for NDL for each of the years shown above Using your calculations in (21) and any other information given in 2.2 respect of NDL evaluate NDL's performance for the year ended 31 December 2020 23 Identify potential areas of risk that NDL may face in the next year (2021) Total 3 25 25 End of group assignment Page 33 CBF4329 Strategic Financial Management Group Assignment (50 marks) Due date 19 November 2021 Namibia Outdoor Gear P. NOG) orary which manufactures a variety of camping equipment Namibia Wide ANNA sed company on the Namibian Stock Exchange sted in NOG NWAS y asked NOG to wake price that they will be wing to be comowy. Since NOG private company, vacation has to perform. Your group has been the NOG determine the price. The following information has been provided The extract from the statement of financial position on 25 February 2020 was as follows N5000 ASSETS Non-current assets Property 33 000 Pant and equipment 18000 51 000 Current assets Inventory 2000 Debtor 4 000 Cash and cash equivalent 2000 8000 50 000 Totalausets EQUITY AND LIABILITIES Share capital (NS1 ) Non-distributable reserve Retained income Ordinary shareholders equity Non-current liabilities 9% Preference shares Debentures 14000 2000 3000 19 000 15 000 20 000 36.000 Current liabilities Creditors 4 000 Total equity and att 30 000 The following is an extract from the statement of comprehensive income of NOG (Pty) Lid for the past year ending 28 February 2020 as well as a forecast for the next three years Actual Budgeted 2020 2021 2022 2023 NSODO N5000 N5000 N5000 Income 23310 32 100 37 330 43 900 Les Operating costs 6993 12 182 13 792 15 729 Depreciation 2717 4480 4490 4490 Profit before interest and ta Interest (debentures) Profit before tax Tax Profit after 12 500 2.500 10 100 2 101 7 999 15428 2500 12928 2589 10 239 19 048 2.500 16 548 3442 13 100 23 681 2500 21 181 4 400 16 778 Further information: The preference share dividend is currently N51 440 000 and the management of NOG (PTY) Lid has indicated that the current dividend pay out ratio will be maintained in the future Growth in after-tax earnings for 2024 and there is expected to be 6% per annum Depreciation will fluctuate, but for the purposes of the valuation, assume the 2023 charge will continue indefinitely. The NAMRA acknowledges NOG s depreciation policy. You can assume that NOG annually invests the same amount as the depreciation charge in order to maintain and replace current assets The current tax rate is 28% and this is expected to remain constant in the foreseeable future Debentures and preference shares are not redeemable and investors in the market can earn 14% and 10% respectively on these investments The cost of equity of NOG (Ply) Ltd is 19.5%, while the weighted average cost of capital is 16% Required Marks Sub- Total Total Perform a valuation of NOG (Pty) Ltd equity by using the free cash flow technique Total 25 25 25 Question 2 (25 marks) Namibia Investment Consultancy (NIC) is a private company that performas valuations and analysis of financial statements on behalf of private clients Your group has been hired to assist NIC in various taks. Your first task is to analyse the financial statements of Namibia Decorations Limited ("NDL"). Last year, NDL sales revenue increased by 35% but this was a result of a selling price cut of 10%. The bank overdraft of NDL has also significantly increased at the end of 31 December 2020 The following financial information has been presented to you about NDL: NDL Extract Statement of profit of loss for the year anded: 31 Dec 2020 NS000 Revenue 8 100 Cost of goods sold and expenses 3700 Profit before tax 4400 31 Dec 2019 N$000 8 000 2 340 3 660 Page 13 NDL Extract Statement of financial position as at Non current assets Current assets Inventory Trade receivables Cash Total assets 31 Dec 2020 N5000 6400 2450 840 1 460 150 8 850 31 Dec 2019 N$000 5 000 1270 430 640 200 6 270 Share capital and reserves Non-current liabilities - debentures repayable 20:25 Current liabilities Trade payables Bank overdraft Total equity and liabilities 5750 8.80 2 220 1060 1 160 8850 4780 880 610 570 40 6270 (Note that the figures above are in N5000s-thousands) Required Marks Sub- Total total 12 12 10 22 2.1 Calculate twelve relevant ratios for NDL for each of the years shown above Using your calculations in (21) and any other information given in 2.2 respect of NDL evaluate NDL's performance for the year ended 31 December 2020 23 Identify potential areas of risk that NDL may face in the next year (2021) Total 3 25 25 End of group assignment Page 33