Prepare an adjusted net asset valuation for OTE using the financial statements and information attached. Unless otherwise noted, assume that the carrying value of the assets approximates fair market value.

Appendix OTE Inc. Statement of financial position As at December 31 2020 2019 $ 4,560 $ 12,720 29,850 1,112,457 Cash Investments Accounts receivable Income taxes receivable Inventory Prepaids 1,370,150 36,160 1,196,190 4.920 2,611,980 4,244,413 13,883 21.500 $ 6.891.776 938,945 4.920 2,098,892 2,998,749 Property, plant, and equipment Intangible assets Due from shareholder Assets 21,500 $ 5,119.141 $ $ Demand bank loan Accounts payable and accruals Warranty accrual Deferred revenue Current portion of term loan Income taxes payable 375,422 1,409,932 315,231 156,500 141,000 96,800 1,175,915 259,412 141,000 11,700 1,684,827 713,000 Term loan Other long-term loans and lease liabilities Share capital Retained earnings Liabilities and shareholder's equity 2,398,085 572,000 1,128,570 150,100 2.643.021 $ 6.891.776 150,100 2,571,214 $ 5,119,141 Appendix 1 (continued) OTE Inc. Statement of profit and loss For the year ended December 31 2020 2019 Sales Cost of sales Gross profit $ 8,959,800 5,949,648 3,010,152 $8,834,000 6,129,709 2,704,291 266,500 166,584 102,600 19,110 1,000 Expenses: Advertising and promotion Amortization Automobile Bad debts Donations Dues and fees Insurance Interest and bank charges Office Professional fees Property taxes Rent expense Repairs and maintenance Salaries and wages Travel Utilities Warranty Income before taxes Income taxes Net income 357,900 219,163 140.800 17,250 1,200 7,500 69,600 119,203 101,200 67,700 44,700 84,654 207,100 1,160,460 117,666 67,600 72,059 154,397 33,840 120,557 57,200 46,600 108,700 34,800 40,900 155,100 1,175,600 103,900 60,200 69,482 296,015 76,754 219,261 Appendix III Additional valuation information 1. The net realizable value of OTE's inventory and accounts receivable are approximately $1,208,860 and $1,367,000, respectively. Bad debt expense consists of actual accounts receivable written off during the year. OTE does not have an allowance for doubtful accounts. 2. OTE's prepaids will not have any value to the purchaser of the business but are needed for operations (not redundant). 3. The property, plant, and equipment, including the leased assets, have a fair value of $4,500,000. The present value of the forgone tax shield related to the increased fair value of assets is $26,000. There are no issues associated with transferring the lease to a purchaser. If the assets are sold, the latent taxes/selling costs are $24,000. 4. For the existing capital assets, the present value of the capital cost allowance (CCA) tax shield is $38,000. 5. In 2019, OTE decided to expand its product mix to include skis. The product did not do well and, by the time OTE discontinued the product and liquidated the inventory in December, it had recorded a negative gross margin of $75,000. One of the customers for the skis who still owed OTE money at the end of 2019 went bankrupt in March 2020; at that time, OTE wrote off the customer's remaining balance of $8,500. OTE had not previously set up an allowance for this receivable. 6. Wutang takes a regular salary from the business and an annual bonus depending on OTE's financial results and the cash available. His salary was $325,000 in 2020 and $300,000 in 2019. Any other cash withdrawals in the year are treated as dividends. FCI normally pays the top executives of its subsidiaries $150,000 per year. 7. Included in interest and bank charges on the income statement is interest on all interest-bearing debt (including the lease liabilities) of $113,000 in 2020 and $32,000 in 2019 8. $326,625 and $338,216 of amortization was included in cost of sales in 2020 and 2019, respectively 9. Community support is very important to Wutang. OTE has an informal apprenticeship program where each summer it hires five local students to work around the shop. OTE doesn't need the extra manpower, but that's not the point. At a total cost of about $20,000 per year, it's more than worth it