MEERUT ADVENTURE COMPANY

You have been hired to value the Meerut Adventure Company (MAC) of Meerut, UP, India. MAC

manufactures and markets outdoor equipment, specifically tents, backpacks, gaiters, and headgear.

Its signature product is its world-famous extreme weather tent line, the WhiteOut Expedition, often

used in expeditions up Mount Everest, K2, and Denali. You just completed your WACC calculation

for MAC and came up with a 16% discount rate as the overall cost of capital.

While publicly held, MAC's shares trade only intermittently on the UP Stock Exchange, Kanpur, UP,

India. Approximately 30% of the firm is held by the family of the founders; and founders hold about

53%.. Because of the lack of a ready market and trading activity, you have established that a 20%

liquidity discount is appropriate. 10,00,000 shares currently are outstanding.

MAC has an Employee Stock Option Plan (ESOP) and is required to perform an annual stock

valuation to determine the allowable deduction for tax and accounting purposes.

The firm's latest balance sheet and income statement are summarized as follows:

MEERUT ADVENTURE COMPANY

As on July 31, 2016

Current Assets Rs 250,000 Aggregate Interest-Bearing Debt Rs 350,000

Non-current Assets Rs 750,000 Equity Rs 650,000

Total Assets Rs1,000,000 Total Liabilities + Equity Rs 1,000,000

MEERUT ADVENTURE COMPANY

Year Ending July 31, 2016

Sales Rs.5,500,000

Cost of Goods Sold 3,575,000

Gross Margin 1,925,000

GS&A 747,500

Depreciation 140,000

EBIT Rs.1,037,500

Interest 42,000

PBT 995,500

Tax (0.30) 298,650

PAT Rs.696,850

MAC management has forecast its sales growth to be 10% for the next five years. At that point, they expect

sales to grow at the sustainable growth rate, about 4% per year into perpetuity.

MAC's cost of goods sold runs a reliable 65% of sales. GS&A expenses have a fixed component of

Rs.500,000 per annum plus a variable component of 4.5% of sales.

Non-current assets are expected to grow at 5% per year for the next five years from the current level - capital

expenditure less depreciation expense. Depreciation expense is expected to run at 20% of beginning non-current

assets.

Net working capital, current assets less current liabilities, is currently Rs.80,000 and is expected to

grow at the same rate as sales for the next five years. After year 5, or from 2022, free cash flows are

expected to grow at 4% in perpetuity, relative to the year 2021 level.

What is the total market value of MAC? The total equity value? The per share value?