Namibia Outdoor Gear (Pty) Ltd (NOG) is a company which manufactures a variety of camping equipment. Namibia Wilderness 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 33 000 Plant and equipment 18 000 51 000 Current assets Inventory 2 000 Debtors 4 000 Cash and cash equivalents 2 000 8 000 Total assets 59 000 EQUITY AND LIABILITIES Share capital (N$1 par) 14 000 Non-distributable reserve 2 000 Retained income 3 000 Ordinary shareholders equity 19 000 Non-current liabilities 9% Preference shares 16 000 Debentures 20 000 36 000 Current liabilities Creditors 4 000 Total equity and liabilities 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 Budgeted 2020 2021 2022 2023 N$000 N$000 N$000 N$000 Income 23 310 32 100 37 330 43 900 Less: Operating costs 6 993 12 182 13 792 15 729 Depreciation 3 717 4 490 4 490 4 490 Page 2 of 3 Profit before interest and tax 12 600 15 428 19 048 23 681 Interest (debentures) 2 500 2 500 2 500 2 500 Profit before tax 10 100 12 928 16 548 21 181 Tax 2 101 2 689 3 442 4 406 Profit after tax 7 999 10 239 13 106 16 776 Further information: The preference share dividend is currently N$1 440 000 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 6% per annum. Depreciation will fluctuate, but for the purposes of the valuation, assume the 2023 charge will continue indefinitely. The NAMRA acknowledges NOGs 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 (Pty) Ltd is 19.5% while the weighted average cost of capital is 16%.

Required Perform a valuation of NOG (Pty) Ltds equity by using the free cash flow technique