Namibia Outdoor Gear (Pty) Ltd ("NOG") is a company which manufactures a variety of camping equipment. Namibia Wildemess Adventurers Limited ("NWA") is a listed company on the Namibian Stock Exchange Interested in acquiring NOG. NWA has recently asked NOG to stake a price that they will be willing to sell the company. Since NOG IS private company, a valuation has to perform. Your group has been hired to help NOG determine their price. The following Information has been provided: The extract from the statement of financial position on 28 February 2020 was as follows: N$000 ASSETS Non-current assets Property 33 ODO Plant and equipment 18 DOO 51 000 Current assets Inventory 2 000 Debtors 4 000 Cash and cash equivalents 2 000 8 000 59 000 Total assets EQUITY AND LIABILITIES Share capital (NS1 par) Non-distributable reserve Retained income Ordinary shareholders equity Non-current liabilities 9% Preference shares Debentures 14 000 2 000 3 000 19 000 16 000 20 000 36 000 Current liabilities Creditors 4 000 Total equity and abilities 59 000 The following is an extract from the statement of comprehensive Income of NOG (Pty) Ltd for the past year ending 28 February 2020 as well as a forecast for the next three years: Actual 2020 N$000 23 310 Budgeted 2021 2022 2023 N$000 N$000 N$000 32 100 37 330 43 900 Income Less: Operating costs Depreciation 6993 3 717 12 182 4 490 13 792 4 490 15 729 4490 Profit before interest and tax Interest (debentures) Profit before tax Tax Profit after tax 12 600 2 500 10 100 2 101 7 999 15 428 2 500 12 928 2 689 10 239 19 048 2 500 16 548 3442 13 106 23 681 2 500 21 181 4406 16 776 Further Information: The preference share dividend is currently N51 440 000 and the management of NOG (Pty) Ltd has indicated that the current dividend pay-out ratio will be maintained in the future. Growth In after-tax earnings for 2024 and thereafter is expected to be 5% 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 eam 14% and 10% respectively on these investments. The cost of equity of NOG (Pty) Ltd is 19.5% while the weighted average cost of capital is 16% . Required Marks Sub- Total Total Perfom a valuation of NOG (Pty) Ltd's equity by using the free cash flow technique Total 25 25 25 Question 2 ( 25 marks) Namibia Imnvestment Consultancy ("NIC") is a private company that performas valuations and analysis of financial ststements on behaf 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 ended: 31 Dec 2020 N3000 Revenue 8 100 Cost of goods sold and expenses 3700 Pront before tax 4 400 31 Dec 2019 N$000 6 000 2340 3 660 NOL Extract statement of financial position as at: Non-current assets Current assets: Inventory Trade receivables Cash Total assets 31 Dec 2020 N$000 6400 2 450 840 1 460 150 8 850 31 Dec 2019 N$000 5 000 1 270 430 640 200 6270 Share capital and reserves Non-current abilities - debentures repayable 2025 Current abilities Trade payables Bank overdraft Total equity and liabilitles (Note that the figures above are in NS0005 - thousands) 5750 880 2 220 1 060 1 160 8 850 4780 880 610 570 40 6270 Marks Sub- Total total 12 12 Required 2.1 Calculate twelve relevant ratios for NDL for each of the years shown above Using your calculations in (2.1) and any other Information given in 2.2 respect of NDL, evaluate NDL's performance for the year ended 31 December 2020. 2.3 Identify potential areas of risk that NDL may face in the next year (2021) Total 10 22 3 25 25 Namibia Outdoor Gear (Pty) Ltd ("NOG") is a company which manufactures a variety of camping equipment. Namibia Wildemess Adventurers Limited ("NWA") is a listed company on the Namibian Stock Exchange Interested in acquiring NOG. NWA has recently asked NOG to stake a price that they will be willing to sell the company. Since NOG IS private company, a valuation has to perform. Your group has been hired to help NOG determine their price. The following Information has been provided: The extract from the statement of financial position on 28 February 2020 was as follows: N$000 ASSETS Non-current assets Property 33 ODO Plant and equipment 18 DOO 51 000 Current assets Inventory 2 000 Debtors 4 000 Cash and cash equivalents 2 000 8 000 59 000 Total assets EQUITY AND LIABILITIES Share capital (NS1 par) Non-distributable reserve Retained income Ordinary shareholders equity Non-current liabilities 9% Preference shares Debentures 14 000 2 000 3 000 19 000 16 000 20 000 36 000 Current liabilities Creditors 4 000 Total equity and abilities 59 000 The following is an extract from the statement of comprehensive Income of NOG (Pty) Ltd for the past year ending 28 February 2020 as well as a forecast for the next three years: Actual 2020 N$000 23 310 Budgeted 2021 2022 2023 N$000 N$000 N$000 32 100 37 330 43 900 Income Less: Operating costs Depreciation 6993 3 717 12 182 4 490 13 792 4 490 15 729 4490 Profit before interest and tax Interest (debentures) Profit before tax Tax Profit after tax 12 600 2 500 10 100 2 101 7 999 15 428 2 500 12 928 2 689 10 239 19 048 2 500 16 548 3442 13 106 23 681 2 500 21 181 4406 16 776 Further Information: The preference share dividend is currently N51 440 000 and the management of NOG (Pty) Ltd has indicated that the current dividend pay-out ratio will be maintained in the future. Growth In after-tax earnings for 2024 and thereafter is expected to be 5% 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 eam 14% and 10% respectively on these investments. The cost of equity of NOG (Pty) Ltd is 19.5% while the weighted average cost of capital is 16% . Required Marks Sub- Total Total Perfom a valuation of NOG (Pty) Ltd's equity by using the free cash flow technique Total 25 25 25 Question 2 ( 25 marks) Namibia Imnvestment Consultancy ("NIC") is a private company that performas valuations and analysis of financial ststements on behaf 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 ended: 31 Dec 2020 N3000 Revenue 8 100 Cost of goods sold and expenses 3700 Pront before tax 4 400 31 Dec 2019 N$000 6 000 2340 3 660 NOL Extract statement of financial position as at: Non-current assets Current assets: Inventory Trade receivables Cash Total assets 31 Dec 2020 N$000 6400 2 450 840 1 460 150 8 850 31 Dec 2019 N$000 5 000 1 270 430 640 200 6270 Share capital and reserves Non-current abilities - debentures repayable 2025 Current abilities Trade payables Bank overdraft Total equity and liabilitles (Note that the figures above are in NS0005 - thousands) 5750 880 2 220 1 060 1 160 8 850 4780 880 610 570 40 6270 Marks Sub- Total total 12 12 Required 2.1 Calculate twelve relevant ratios for NDL for each of the years shown above Using your calculations in (2.1) and any other Information given in 2.2 respect of NDL, evaluate NDL's performance for the year ended 31 December 2020. 2.3 Identify potential areas of risk that NDL may face in the next year (2021) Total 10 22 3 25 25