the company's weighted average cost of capital is 12%. the company authorised and issued share capital is 100 share at R1.00 each.

Required Calculate the value of 20% of the shares using the free cash flow method

Question 4 [24 You are invited to the shareholders meeting where they will discuss the disposal of 20% of the shares of Isilumko (Pty) Ltd to one of their biggest suppliers, Lucky (Pty) Ltd. To prepare for this meeting you are required to calculate the value of the shares of Isilumko (Pty) Ltd. You have the following extracts from the company's financial statements at your disposal: Proforma income and operating expenses of Isilumko (Pty) Ltd for the years 2022 -2024 2024 2023 2022 Income 4 350 000 3 875 000 3 215 400 Cost of sales (2 827 500) (2 441 250) (1 993 548) Gross profit 1 522 500 1 433 750 1 221 852 Operating expenses Accounting fees (150 000) (142 000) Bank charges (89 000) (78000) Depreciation (50 000) (30 000) Finance cost (30 000) (28 000) Water and electricity (112 000) (100 800) Salaries and wages (104 500) (139 950) Profit before tax 987 000 915 000 Taxation (276 360) (256 200) Profit after tax The company expects the cash flow to grow at 4% each year. (138 000) (69 000) (20 000) (22 000) (90 720) (64 832) 817 300 (222 844) 594 456 710 640 658 800 Question 4 [24 You are invited to the shareholders meeting where they will discuss the disposal of 20% of the shares of Isilumko (Pty) Ltd to one of their biggest suppliers, Lucky (Pty) Ltd. To prepare for this meeting you are required to calculate the value of the shares of Isilumko (Pty) Ltd. You have the following extracts from the company's financial statements at your disposal: Proforma income and operating expenses of Isilumko (Pty) Ltd for the years 2022 -2024 2024 2023 2022 Income 4 350 000 3 875 000 3 215 400 Cost of sales (2 827 500) (2 441 250) (1 993 548) Gross profit 1 522 500 1 433 750 1 221 852 Operating expenses Accounting fees (150 000) (142 000) Bank charges (89 000) (78000) Depreciation (50 000) (30 000) Finance cost (30 000) (28 000) Water and electricity (112 000) (100 800) Salaries and wages (104 500) (139 950) Profit before tax 987 000 915 000 Taxation (276 360) (256 200) Profit after tax The company expects the cash flow to grow at 4% each year. (138 000) (69 000) (20 000) (22 000) (90 720) (64 832) 817 300 (222 844) 594 456 710 640 658 800