Maskoot is a privately held company. John Dee, its owner-manager, has been approached by Juslaw. for a possible acquisition. The company has no debt.

What is the minimum price John Dee should ask, given the following information about his company?

• Sales, currently at R500 million, are expected to grow by 6 percent for the next three years, and then by 4 percent in perpetuity
• The operating margin before tax is expected to remain at 20 percent of sales
• Annual capital expenditure is expected to be equal to the depreciation expense of the year
• The working capital requirement would remain at 18 percent of sales
• The corporate tax rate is 40 percent
• John Dee requires a return of at least 10 percent for his family investment in the company

Answer rating: 100% (QA)

Current sales R500 million Growth rate 6 for 3 years 4 thereafter Operating margin 25 times sale... View the full answer