Segosese Flight Academy (SFL) specialises in providing premium training to South African clients who wish to become world class pilots. The company is situated in Lanseria Airport (Gauteng). The company prides itself in having trained over 8000 world class pilots since its inception in 1994. SFL is approved by the South African Civil Aviation Authority to offer the following courses :Private Pilot License (PPL), Night rating, Commercial Pilot Licence (CPL) and Instrument rating. Dr Honest Ledwaba, the sole owner of SFL, wants to sell the academy and has approach you to assist with the valuation of his interest. You had coffee with him at the end of year 2022 and he provided you with the following information: - Budgeted figures for SFL showed the following amounts: - Included in profit after tax of year 2023 is a profit on sale of assets of 125000 and depreciation R200 000. Depreciation for subsequent years is estimated as follows: 2024: R225 000 2025: R235 000 2026: R250 000 - It is expected that SFL will experience a constant real growth rate of 2.5% beyond 2026 with inflation remaining stable at 4%. Inflation is expected to be 5% from 2023 till 2026. - SFL has a loan on which it pays interest of R195 000 annually (included in profit after tax). The loan forms part of permanent capital structure of the business. The loan has a market value of R1650000. - The financial statements for the year ended 2022 reflected the following balances: Cash and cash equivalents: R170000 Accounts Receivable: R120 000 Accounts Payable: R90 000 Inventory: R40 000 Depreciation: R230 000 - It is expected that non-current assets will be replaced at an annual cost equal to year 2022 inflation adjusted depreciation. - SFL owns an investment in preference shares with a market value of R457 500 . The preference shares pay a fixed annual dividend which was included in calculating profit after tax. The preference shares currently yield 12% in the market. - SFL has a WACC of 17%. The prevailing company tax rate is 27%. REQUIRED: 6.1 Prepare a report in which you advise Dr Honest Ledwaba on the value of his shareholding SFL at the end of year 2022. 25 Segosese Flight Academy (SFL) specialises in providing premium training to South African clients who wish to become world class pilots. The company is situated in Lanseria Airport (Gauteng). The company prides itself in having trained over 8000 world class pilots since its inception in 1994. SFL is approved by the South African Civil Aviation Authority to offer the following courses :Private Pilot License (PPL), Night rating, Commercial Pilot Licence (CPL) and Instrument rating. Dr Honest Ledwaba, the sole owner of SFL, wants to sell the academy and has approach you to assist with the valuation of his interest. You had coffee with him at the end of year 2022 and he provided you with the following information: - Budgeted figures for SFL showed the following amounts: - Included in profit after tax of year 2023 is a profit on sale of assets of 125000 and depreciation R200 000. Depreciation for subsequent years is estimated as follows: 2024: R225 000 2025: R235 000 2026: R250 000 - It is expected that SFL will experience a constant real growth rate of 2.5% beyond 2026 with inflation remaining stable at 4%. Inflation is expected to be 5% from 2023 till 2026. - SFL has a loan on which it pays interest of R195 000 annually (included in profit after tax). The loan forms part of permanent capital structure of the business. The loan has a market value of R1650000. - The financial statements for the year ended 2022 reflected the following balances: Cash and cash equivalents: R170000 Accounts Receivable: R120 000 Accounts Payable: R90 000 Inventory: R40 000 Depreciation: R230 000 - It is expected that non-current assets will be replaced at an annual cost equal to year 2022 inflation adjusted depreciation. - SFL owns an investment in preference shares with a market value of R457 500 . The preference shares pay a fixed annual dividend which was included in calculating profit after tax. The preference shares currently yield 12% in the market. - SFL has a WACC of 17%. The prevailing company tax rate is 27%. REQUIRED: 6.1 Prepare a report in which you advise Dr Honest Ledwaba on the value of his shareholding SFL at the end of year 2022. 25