Koppies Dairy (Pty) Ltd is currently growing its profits at 95% of the inflation rate, due to a new digital blender being used to produce dairy products sold by Koppies. The new product, released in 2018, continues to gain strength in the market. This has resulted in an increase in customers when compared with other dairy producers. Koppies has delivered strong results because of the effective control measures adopted 2 years ago. This control measure includes the study of brands by the research team which then shares its report with the marketing team to ensure Koppies products are at the top of the range throughout all seasons. This has resulted in easy access to cash, enabling the entity to meet its short-term obligations at a faster rate leading to reduction in its debts. The weighted average cost of capital is 12,45%.

The non-current asset portfolio is currently worth R2 million and current profits are expected to increase as indicated above. The increase in profits is expected to grow constantly.

An extract from the annual financial statements for period ending 31 March 2020, for Koppies:

Total assets (Non-current assets: R1,5 million) 4 500

Total liabilities 1 500

Total equity 3 000

Revenue 3 950

Net profit 1 785

Write a report to the chairperson detailing the following:

a) Factors to consider when acquiring Koppies Diary and (5)

b) Value of Koppies Dairy using the provided information. (10)