Question$4/$

Siyazenzela Ltd is a listed farming company inolved in various commercial agricultural activities including growing cannabis for its health benefits. The company is consolidating its expansionary activities to increase production capacity and thereby exploit the ever increasing local and international cannabis market. Mnagement has decided to use retained earnings to fund the expansion and the depreciation charge for asset replacement $.$ Here follows the extract from its annual report.

Statement of Financial Position as at $31$ December $2023$

R $000$

Share Capital $198000$

Retained earnings $178000$

Equity $376000$

Redeemable debentures $136000$

Borrowings $102000$

Capital and reserves $614000$

The debentures will be redeemed in $2030.$

The cannabis investment project team $($CIT$)$ has made the following $5-$year projections:

Annual projections $20252026202720282029$

Profit after tax $120150180210250$

Dividends paid $4050607090$

Retained earnings $80100120140160$

Profit after tax is net of the following costs

Depreciation $607090110130$

Interest $2020202020$

The cost of equity and WACC are estimated to be $12\%$ and $11\%$ respectively $.$ It is further expected that dividends will grow at the annual rate of $6\%$ in perpetuity.

Required

$4\mathrm{.}1.$ Calculate the value of the equity as at $31$ December $2023$ using:

$($a$)$ Dividend discount model $(5)$

$($b$)$ Free cash flow to be firm$(15)$