MMJ Manufacturing is a private company with five (5) shareholders who hold all of the issued shares in the company. One of the shareholders, Min Li Zheng, who wants to sell her shares in the company has hired you as a consultant to value her shareholding which comprises 80,000 shares.

The operating statistics and capital structure of the company is as follows:

Net Operating Profit after tax = $120,000

Historical and expected future growth in profits have averaged at 4% per annum.

Historical rate of return on ordinary shares = 10%

The Company has 400,000 shares on issue and the book value of Shareholders equity is $480,000.

Required:

Using the Earnings Capacity Valuation technique, what is your valuation of Min Li Zhengs investment in MMJ Manufacturing?

PLEASE USE EXCEL