Question 1.

1
A
Question 1.2
B
Question 1.3
C
Question 1.4
A
Question 1.5
D
Question 1.6
A
Question 1.7
C
Question 1.8
B
Question 1.9
D
Question 1.10
B
Question 1.11
D
Question 1.12
B
Question 1.13
B
Question 1.14
A
Question 1.15
C
Question 1.16
C
Question 1.17
A
Question 1.1
discounted cash flow 1
Question 1.2
the present value of the future income which the share generates. 1
Question 1.3
market values of all shares to decrease, all else constant. 1
Question 1.4
Gordon’s dividend growth model / dividend discount model 1
Question 1.5
R 273.00 2
Question 1.6
R1 056 500 2
Question 1.7
7.14 2
Question 1.8
III only 1
Question 1.9
R 10,800 2
Question 1.10
R 18,667 2
Question 1.11
All of the above 1
Question 1.12
Operating days 1
Question 1.13
Profit over Interest (Interest cover ) 1
Question 1.14
Net income divided by the total number of shares issued. 1
Question 1.15
17% 2
Question 1.16
R 540,700 2
Question 1.17
R 0.735 2

25
 2.1
Marks
2.1
Year 0 Year 1 Year 2 Year 3 Year 4
Dividend 4 5 6.25 7.81 8.36 1
PV of Pepertuity 92.88 2
5 6.25 100.69 1
Rate 16%
Value 73.47 2 (1P)

2.2
-Assume a company will always pay dividends 1
-Difficult to forecast future dividends 1
-Assumes a constant growth rate for dividends at one point 1
-Assume that required return will remain constant into perpertuity 1
- Does not take risk into account 1
-Any other valid point 1
Max 4
Savings on material - Not relevent to NAL calculation as its relates to operations
Savings on purchase of machinery
Lease payments
Tax on lease payment
Savings on cost of maintanance after tax
Tax savings on W&T
Cash flows

Cost of debt after tax

NAL
Conclusion

The life span of the machinery

The availability of spare parts
Guarantee given
Reliability of suppliers of machinery and or the material
Quality of the furniture manufactured
Demand for the furniture manufactured
Availability of skilled staff
Any other valid point
Year 0 year 1 year 2 year 3 year 4

2,500,000.00
-510,000.00 -510,000.00 -510,000.00 -510,000.00 -510,000.00
142,800.00 142,800.00 142,800.00 142,800.00
43,200.00 43,200.00 43,200.00 43,200.00
-140,000.00 -140,000.00 -140,000.00 -140,000.00
1,990,000.00 -464,000.00 -464,000.00 -464,000.00 -464,000.00

7.2%

457,896.65
year 5

1
1
1
142,800.00 1
43,200.00 2
-140,000.00 2
46,000.00 1
1
2
1
1P
1P
MAX 10

1
1
1
1
1
1
1
Max 5
Growth (Terminal Value) 5%
WACC 17%
Report Format

2018 2019 2020 2021

Net Profit after tax 3,900,000 6,700,000 8,800,000
Interest paid 1,555,200 1,555,200 1,555,200
Depreciation 2,300,000 2,600,000 2,900,000
Profit/ loss on sale of assets 400,000 -460,000 570,000
Dividends received -200,000 -250,000 -290,000
7,955,200 10,145,200 13,535,200
Net working capital -3,100,000 -4,300,000 -6,500,000
Maintenance Cost -2,438,000 -2,756,000 -3,074,000
Free Cash Flow 2,417,200 3,089,200 3,961,200 4,159,260.00
Terminal value 34,660,500
2,417,200 3,089,200 38,621,700

WACC 17%
NPV 28,436,938
Investment in Copa 0 Not part of the sale
Holiday house 2,500,000.00
MV of debt -15,428,571
Cash 3,200,000
18,708,366

Value is approximately R16 Mil to R22 Mil

Calculations

Calc 1-Net Working Capital

2017 2018 2019 2020

Balance 7,100,000 10,200,000 14,500,000 21,000,000
Movement 3,100,000 4,300,000 6,500,000

Calc 2-Terminal Value

2020 Cash flow 3,961,200

Terminal Value (2021) 4,159,260 1
PV of Terminal value 34,660,500 1
Marks

1
2
1
2
1
1
1P
2(1P)
1P
1P
1

1
1P
2
2(1P)
2
1
1P

1P

2
1

Max 25
APPENDIX 1 : Save – Up 2017 Annua 2017 2016 Asset management
Statement of financial position as a "000" "000"
ASSETS Inventory turn over OR 14.71
Non-Current Assets Days 24.82
Property, plant and equipment 143,516 117,147
Investments 36,633 25,456 Receivables collecton period 69.90
Total Non-Current Assets 180,149 142,603
Current Assets Credit payment period 43.17
Inventories 120,403 120,702

Receivables 6,990 7,052

It is now taking the company shorter period ( 5 days less) to turn around th
Taxation 147 The company's business is mainly cash with only 2% of sales made in credi

Cash 64,103 23,423

Collection period on the minimal/ limited credit sales made by the busines

Total Current Assets 191,496 151,324 The business s also taking 3 days longer to settle its creditors as compared
management
TOTAL ASSETS 371,645 293,927
Liquidity position
EQUITY AND LIABILITIES
Equity Current ratio 0.81 :1
Share Capital 1,956 1,956 Quick ratio 0.30 :1
Share Premium 10,842 10,842 Both the current ratio and the quick ratio are below average/ the norm

Retained earnings 107,959 90,777

However this is expected for a company on this nature where 98% of its sa

Total equity 120,757 103,575

Since the majority of current assets is inventory, the quick ratio even looks
In this type of industry current assets are ussually very liquid therefore Bah
Non-current liabilities
Long term borrowings 12,400 12,720 135,869
Deferred tax 2,712 2,313
Total Non-current liabilities 15,112 15,033
Current liabilities
Trade and other payables 215,305 164,460
Shareholders for dividends 12,620 10,859
Current tax payable 7,851 -
Total currents liabilities 235,776 175,319
TOTAL EQUITIES AND LIABILITIES 371,645 293 927
Profitability
Statement of Comprehensive Income 2016
2017
Turnover 1824888 1500914 Gross profit 2.97% 3.12%
Cost of sales and services -1770684 -1454017 Net Profit 1.84% 2.10%
Gross profit 54204 46897 Return on asset 23.62% 25.43%
Interest Income 6954 4651 Return on Equity 27.74% 30.38%
Other income 4373 5149
Finance Cost -1967 -1823 Both GP% and NP% have decresed slighly due to increase in cost of sales a

Profit before tax 63564 54874

ROA and ROE have decreased this might be due to the fact that sales are s
Taxation -30061 -23405 In both years the ROE exceed ROA, which implies positive leverage
Profit after tax 33503 31469
Earnings per share 171.2 160.8 SARS
EMPLOYEES/ UNION
SUPPLIERS
THE FEW DEBTORS
CUSTOMERS
THE GENERAL PUBLIC
THE AUDITORS
THE LENDERS/ BANK
CURRENT SHARE HOLDERS
 12.05
30.30 days

85.75

40.15

( 5 days less) to turn around their inventory into sales, which is an indication of good asset managen as cash position improves
only 2% of sales made in credit

edit sales made by the business has slightly increased which further improves the companys cash position

ettle its creditors as compared to the previous year. Which further improves the companys cash management position and asset

0.86 :1
0.17 :1
e below average/ the norm

this nature where 98% of its sales are on cash and only 2% on credit

ory, the quick ratio even looks more weaker

sually very liquid therefore Bahumi should not be too concerned about the liquidity position of the business

e to increase in cost of sales and services

due to the fact that sales are strictly on cash therefore negetively affecting returns/ rather limiting the potential increase in slaes
mplies positive leverage
 1

1
1

1
Max 6

1
1
1

1
1
MAX 6

1
1
1
1
1
1

MAX 6
1
1
1
 1
1
1
1

Max 7