Q No.2: Statement of Financial position for Aroma Corporation is given below for the period ending Dec 31 2020. *All values given in 000 $. Other Information: PAT = 320 EBIDTA=428 Rf= 5% Rm= 15 % Geared Beta of Aromas Industry is 1.3 (Preferred stocks are considered as debt financing) Profit Margin and Market Share of Aroma Corporation are constantly declining for last 3 years and various options are being discussed at board level for getting into a new venture with a fresh Brand Name and better product Quality and shut down the operations in existing name. A competitor has also offered to acquire operations of Aroma Corporation. On the other hand a group of investors still believe that company has potential to grow due to its old customer base which are quite satisfied by the offered services and are ready to inject more debt in the company. Analyst to CFO has gathered below information to be used in strategic Planning. Cost of Debt = 18% Tax Rate = 25% For coming 5 Years there isnt any chance of growth in Market share and profit but after 5 years a constant growth of 9 % is expected. Future Cashflow for a period of 5 Years: Yrs Cash Flows 1 106 2 121 3 100 4 112 5- Terminal 100 CEO has advised to have a concrete information about companys value and a suggestion of using various range of companys value is given by Finance director. Required: You, as a Financial strategist will be leading the presentation in next Board meeting and you are required to calculate Value of Aroma Corporation with following methods: 1. Asset Based Valuation [2.5 Marks] 2. Earning Based Valuation [2.5 Marks] 3. Cashflow Based Valuation [2.5 Marks] 4. You are also expected to explain silent features of these 3 methods. [2.5 Marks]

Assets Liabilities and Equity 211 63 Cash Bank Accounts Prepaid Assests Inventories 32 66 121 350 Accounts Payble Accruals Salaries Payble 54 569 328 Total Current Assets Total Current Liabilites 189 Land Building 179 187 Long term Bonds Prefered Stock Retained Earning Common Equity 1901 96 103 218 366 Total Assets 935 935 *All values given in '000 $. Other Information: PAT = 320 EBIDTA=428 Rf= 5% Rm= 15% Geared Beta of Aroma's Industry is 1.3 (Preferred stocks are considered as debt financing) Profit Margin and Market Share of Aroma Corporation are constantly declining for last 3 years and various options are being discussed at board level for getting into a new venture with a fresh Brand Name and better product Quality and shut down the operations in existing name. A competitor has also offered to acquire operations of Aroma Corporation. On the other hand a group of investors still believe that company has potential to grow due to its old customer base which are quite satisfied by the offered services and are ready to inject more debt in the company Analyst to CFO has gathered below information to be used in strategic Planning. Cost of Debt = 18% 2 Tax Rate = 25% For coming 5 Years there isn't any chance of growth in Market share and profit but after 5 years a constant growth of 9% is expected Future Cashflow for a period of 5 Years: Yrs 1 2 3 Cash Flows 106 121 100 112 100 4 5- Terminal CEO has advised to have a concrete information about company's value and a suggestion of using various range of company's value is given by Finance director Required: You, as a Financial strategist will be leading the presentation in next Board meeting and you are required to calculate Value of Aroma Corporation with following methods: 1 Asset Based Valuation [2.5 Marks] 2. Earning Based Valuation [2.5 Marks] 3. Cashflow Based Valuation [2.5 Marks] 4. You are also expected to explain silent features of these 3 methods. [2.5 Marks] Assets Liabilities and Equity 211 63 Cash Bank Accounts Prepaid Assests Inventories 32 66 121 350 Accounts Payble Accruals Salaries Payble 54 569 328 Total Current Assets Total Current Liabilites 189 Land Building 179 187 Long term Bonds Prefered Stock Retained Earning Common Equity 1901 96 103 218 366 Total Assets 935 935 *All values given in '000 $. Other Information: PAT = 320 EBIDTA=428 Rf= 5% Rm= 15% Geared Beta of Aroma's Industry is 1.3 (Preferred stocks are considered as debt financing) Profit Margin and Market Share of Aroma Corporation are constantly declining for last 3 years and various options are being discussed at board level for getting into a new venture with a fresh Brand Name and better product Quality and shut down the operations in existing name. A competitor has also offered to acquire operations of Aroma Corporation. On the other hand a group of investors still believe that company has potential to grow due to its old customer base which are quite satisfied by the offered services and are ready to inject more debt in the company Analyst to CFO has gathered below information to be used in strategic Planning. Cost of Debt = 18% 2 Tax Rate = 25% For coming 5 Years there isn't any chance of growth in Market share and profit but after 5 years a constant growth of 9% is expected Future Cashflow for a period of 5 Years: Yrs 1 2 3 Cash Flows 106 121 100 112 100 4 5- Terminal CEO has advised to have a concrete information about company's value and a suggestion of using various range of company's value is given by Finance director Required: You, as a Financial strategist will be leading the presentation in next Board meeting and you are required to calculate Value of Aroma Corporation with following methods: 1 Asset Based Valuation [2.5 Marks] 2. Earning Based Valuation [2.5 Marks] 3. Cashflow Based Valuation [2.5 Marks] 4. You are also expected to explain silent features of these 3 methods. [2.5 Marks]