Cost of borrowing is 5%

bank lending rate = 5%

Salary in 2016 was $600,000 and increased by $100,000 each year.

Equipment cost, fixtures and leasehold costs = $750,000

Upgrade costs = $50,000

Create DCF model to determine fair market value of shares.

 

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Balance Sheets at December 31st Cdn ($000) Current Assets Cash Prepaid Expenses Inventory Equipment and Leaseholds (net) Total Assets Current Liabilities Bank indebtedness Accounts payable and accruals Current portion of Long-term debt Long-term debt Total Liabilities Equity Common shares Retained Earnings Total Liabilities and Equity Revenue Food, consumables, wait staff & cooks Gross Profit Operating Expenses Advertizing and marketing Store Rent Head Office Rent Amortization of capital assets Administrative wages Regional supervisors Other administrative expenses Interest expense Pre-tax profit Income tax expense Net Income Retained earnings - opening balance Retained Earnings - ending balance Equipment and Leaseholds Orig Cost Accumulated deprecation Net Book Value 2020 $ Number of stores. 3,029 1,090 9,000 13,119 20,966 34,085 4,250 1,200 5,450 10,200 15,650 Mike's Breakfast Bistro Inc - Historical Financial Statements Income Statements Years Ending December 31st Cdn ($000) 100 18,335 18,435 34,085 2020 $ 6,250 6,000 1,082 3,347 2,000 900 450 570 2019 $ 20,599 6,401 (1,664) 4,737 8,861 18,335 - 947 8,250 9,197 60 90,000 80,850 63,000 56,595 27,000 2018 $ 803 660 7,500 6,750 8,303 7,410 20,313 19,545 18,641 29,510 4,117 8,638 3,832 3,425 1,200 1,200 9,149 13,263 11,400 12,600 20,549 25,863 2019 $ - 72,000 50,400 24,255 21,600 617 6,000 6,617 17,850 27,848 26,051 24,467 2018 $ 55 100 100 100 100 8,861 1,885 (2,529) (4,228) 8,961 1,985 (2,429) (4,128) 29,510 27,848 26,051 24,467 5,050 5,000 2017 $ 1,040 3,096 1,760 750 350 - (776) 2,207 1,885 (2,529) 8,861 5,640 5,500 1,061 3,232 1,880 825 400 1,003 1,571 2,291 19,541 18,617 17,888 4,714 2,983 1,148 (1,226) 3,488 10,450 3,030 1,200 14,680 13,800 28,480 2017 $ 50 63,450 44,415 19,035 4,503 4,500 1,020 2,959 1,640 675 300 (298) 850 (4,228) 1,885 (2,529) 2016 $ 2017 $ - 8,533 2,662 2,400 13,595 45 15,000 28,595 2019 2020 $ 48,750 $ 44,750 (27,784) (24,437) 20,966 20,313 19,545 18,641 17,850 2016 $ 55,600 38,920 16,680 3,970 4,000 1,000 3,150 1,530 600 250 2,334 16,834 2018 2016 $ $ 40,750 36,750 33,000 33,000 (21,205) (18,109) (15,150) (12,000) 21,000 (154) 40 (114) (4,000) (4,228) 40 40 Balance Sheets at December 31st Cdn ($000) Current Assets Cash Prepaid Expenses Inventory Equipment and Leaseholds (net) Total Assets Current Liabilities Bank indebtedness Accounts payable and accruals Current portion of Long-term debt Long-term debt Total Liabilities Equity Common shares Retained Earnings Total Liabilities and Equity Revenue Food, consumables, wait staff & cooks Gross Profit Operating Expenses Advertizing and marketing Store Rent Head Office Rent Amortization of capital assets Administrative wages Regional supervisors Other administrative expenses Interest expense Pre-tax profit Income tax expense Net Income Retained earnings - opening balance Retained Earnings - ending balance Equipment and Leaseholds Orig Cost Accumulated deprecation Net Book Value 2020 $ Number of stores. 3,029 1,090 9,000 13,119 20,966 34,085 4,250 1,200 5,450 10,200 15,650 Mike's Breakfast Bistro Inc - Historical Financial Statements Income Statements Years Ending December 31st Cdn ($000) 100 18,335 18,435 34,085 2020 $ 6,250 6,000 1,082 3,347 2,000 900 450 570 2019 $ 20,599 6,401 (1,664) 4,737 8,861 18,335 - 947 8,250 9,197 60 90,000 80,850 63,000 56,595 27,000 2018 $ 803 660 7,500 6,750 8,303 7,410 20,313 19,545 18,641 29,510 4,117 8,638 3,832 3,425 1,200 1,200 9,149 13,263 11,400 12,600 20,549 25,863 2019 $ - 72,000 50,400 24,255 21,600 617 6,000 6,617 17,850 27,848 26,051 24,467 2018 $ 55 100 100 100 100 8,861 1,885 (2,529) (4,228) 8,961 1,985 (2,429) (4,128) 29,510 27,848 26,051 24,467 5,050 5,000 2017 $ 1,040 3,096 1,760 750 350 - (776) 2,207 1,885 (2,529) 8,861 5,640 5,500 1,061 3,232 1,880 825 400 1,003 1,571 2,291 19,541 18,617 17,888 4,714 2,983 1,148 (1,226) 3,488 10,450 3,030 1,200 14,680 13,800 28,480 2017 $ 50 63,450 44,415 19,035 4,503 4,500 1,020 2,959 1,640 675 300 (298) 850 (4,228) 1,885 (2,529) 2016 $ 2017 $ - 8,533 2,662 2,400 13,595 45 15,000 28,595 2019 2020 $ 48,750 $ 44,750 (27,784) (24,437) 20,966 20,313 19,545 18,641 17,850 2016 $ 55,600 38,920 16,680 3,970 4,000 1,000 3,150 1,530 600 250 2,334 16,834 2018 2016 $ $ 40,750 36,750 33,000 33,000 (21,205) (18,109) (15,150) (12,000) 21,000 (154) 40 (114) (4,000) (4,228) 40 40

Answer rating: 100% (QA)

To determine the fair market value of the shares we can use the div... View the full answer