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+27737560989
for FAC MAC ECS DSC TAX QMI FIN INV BNU STA
tutorials
, Question 1
Lesidi is considering making a bid for Bafifi. Bafifi has 10 million shares in issue. The following
information relating to Bafifi is provided
2023 2024 2025 2026
actual Forecast Forecast Forecast
Year 1 Year 2 Year 3 Year 4
Revenue 260,000.00 291,000.00 311,370.00 333,165.90
Cost of sales (125,000.00) (174,720.00) (171,253.50) (160,175.91)
Gross Profit 135,000.00 116,280.00 140,116.50 172,989.99
Other Operating expenses (40,000.00) (46,000.00) (48,300.00) (50,715.00)
Depreciation (23,000.00) (23,000.00) (23,000.00) (23,000.00)
Profit from Operations 72,000.00 47,280.00 68,816.50 99,274.99
Finance Cost (24,000.00) (10,000.00) (10,000.00) (10,000.00)
Profit before tax 48,000.00 37,280.00 58,816.50 89,274.99
Taxation – 27% (12,960.00) (10,065.60) (15,880.46) (24,104.25)
Profit after tax 35,040.00 27,214.40 42,936.05 65,170.74
1 2 3
Profit after tax 27,214.40 42,936.05 65,170.74
Add back Depreciation 23,000.00 23,000.00 23,000.00
Terminal Value =( 65,170.74
+23000)* (1 + 0.05) / (0.165 -
0.05) 805,037.19
Free cashflow to the firm 50,214.40 65,936.05 893,207.93
Discount @16.5% 0.86 0.74 0.63
Present Values 43,102.49 48,581.51 564,904.19
Total Value 656,588.19
c)
Focus on Cash Flows: This method directly considers the cash generated by the company,
which is a fundamental measure of its financial health and ability to generate value for
shareholders.
Flexibility: It can be applied to various types of companies, regardless of their capital
structure or industry.
Account for Growth: The terminal value calculation incorporates a growth rate, which
reflects the company's expected future performance.
Simplicity: While the calculations can be complex, the underlying concept is relatively
straightforward, making it easier to understand and explain.
d)
+27737560989
for FAC MAC ECS DSC TAX QMI FIN INV BNU STA
tutorials
, Question 1
Lesidi is considering making a bid for Bafifi. Bafifi has 10 million shares in issue. The following
information relating to Bafifi is provided
2023 2024 2025 2026
actual Forecast Forecast Forecast
Year 1 Year 2 Year 3 Year 4
Revenue 260,000.00 291,000.00 311,370.00 333,165.90
Cost of sales (125,000.00) (174,720.00) (171,253.50) (160,175.91)
Gross Profit 135,000.00 116,280.00 140,116.50 172,989.99
Other Operating expenses (40,000.00) (46,000.00) (48,300.00) (50,715.00)
Depreciation (23,000.00) (23,000.00) (23,000.00) (23,000.00)
Profit from Operations 72,000.00 47,280.00 68,816.50 99,274.99
Finance Cost (24,000.00) (10,000.00) (10,000.00) (10,000.00)
Profit before tax 48,000.00 37,280.00 58,816.50 89,274.99
Taxation – 27% (12,960.00) (10,065.60) (15,880.46) (24,104.25)
Profit after tax 35,040.00 27,214.40 42,936.05 65,170.74
1 2 3
Profit after tax 27,214.40 42,936.05 65,170.74
Add back Depreciation 23,000.00 23,000.00 23,000.00
Terminal Value =( 65,170.74
+23000)* (1 + 0.05) / (0.165 -
0.05) 805,037.19
Free cashflow to the firm 50,214.40 65,936.05 893,207.93
Discount @16.5% 0.86 0.74 0.63
Present Values 43,102.49 48,581.51 564,904.19
Total Value 656,588.19
c)
Focus on Cash Flows: This method directly considers the cash generated by the company,
which is a fundamental measure of its financial health and ability to generate value for
shareholders.
Flexibility: It can be applied to various types of companies, regardless of their capital
structure or industry.
Account for Growth: The terminal value calculation incorporates a growth rate, which
reflects the company's expected future performance.
Simplicity: While the calculations can be complex, the underlying concept is relatively
straightforward, making it easier to understand and explain.
d)
