Valuation of Winter Sports Inc

Winter Sports Inc. has the following Balance Sheet and Income Statement for 2020.

Cash $ 1,000 Accounts Payable $10,000

Marketable Securities 5,000 Note Payable 5,000

Accounts receivable 12,000

Inventories 14,000

Total Current Assets $32,000 Total Liabilities $15,000

Equipment (cost $30,000) 16,000 Common Stocks 3,000

- Retained Earnings 90,000

Total $108,000 Total $108,000

2020

Sales $200,000

COGS 100,000

Gross Profit 100,000

Operating expenses 72,000

Depreciation 2,000

Interest Expense 1.000

Total Expenses 75,000

Income before Taxes 25,000

Income Taxes (40%) 10,000

Net Income $15,000

Other information:

The business does not have a business cycle 2020 is an average year.

The President (shareholder) has been paid a salary of $40,000 but the market-rate for his services would have been $50,000.

Marketable Securities are surplus cash in excess of operational needs (FMV $5,000)

Expected capital expenditures required in order to sustain operations is estimated to be $2,000 per year. CCA rate on capital assets acquired is 30%

The Undepreciated Capital Cost (UCC) balance on the existing assets is $20,000 and the CCA rate is 30%.

Company tax rate is 40%. Capital Gains are taxed at 50% and no capital losses allowed on depreciable property. WACC rate is 15%.

Based on Company's growth prospects, economic and market conditions, capitalization rate is judged to be 12%

Required: Calculate the Business Equity Value using the Capitalized Cash Flow Method and enter the numbers for the various items of the calculation below:

1 Normalized EBITDA:$

2 Income Taxes: $

3 Sustaining Capital Investments: $

4 PV of CCA Tax Shield on sustaining capital investments: $ Answer

5 Normalized Discretionary Cash Flow: $

6 Capitalized Cash Flow: $

7 PV of CCA Tax Shield on Existing Assets: $

8 Liabilities: $

9 Redundant Assets: $ Answer

10 Business Equity Value: $