Parameters for Business and Modelling

All budgets and recommendations are on a pre-tax basis (ignore tax).

The recommended price (AUD million) for the business is based on a 'walk-in, walk-out' basis as of 31 December 2020 (the new owner will incur all cash operating and capital costs and income for 2021). The sale includes all freehold title to land, existing ponds, juvenile and any growing prawn already stocked in ponds, water rights, existing and new regulatory approvals for expansion, a 3 year retail sale agreement and all machinery, plant, aeration, harvesting and processing equipment.

Included in the sale of the business is all machinery, plant and packaging equipment to continue to operate the farms. Assume the salvage value of any machinery, plant, hatchery, aeration, harvesting and processing equipment is 100% of the original value at the end of 2045. At the time of purchasing the business (2021) assume the current value (real) of "depreciating assets" i.e. machinery, plant, hatchery, aeration, harvesting and processing equipment is $6 million.

There is an on-going cash cost for repairs, maintenance and 'stay-in business' replacement capital expenditure to ponds, machinery, plant, hatchery, aeration, harvesting and processing equipment. In 2021 - year one - the cash cost for this category is $2,000,000 and grows incrementally by an additional +$500,000 per annum until the business achieves a 'steady-state' in prawn production. For example, if both Martha River and Zebmoor developments go ahead then on-going cash cost for repairs, maintenance and 'stay-in business' replacement capital expenditure in 2039 is $11,000,000 (real terms).

Assume zero capital growth or depreciation in real terms for land (except as specified for Zebmoor) and ponds. That is, salvage value = initial investment. For simplicity we will assume 100% salvage value of ponds and land.

Please calculate the NPV and MIRR

a.Include a sensitivity analysis highlighting the importance of key variables and the assumptions/reasoning behind the inputs (variables) used in the valuation.

b.Develop and include three additional scenarios (base case plus three) to help the investor understand the risks and what the range of investment returns might be depending on how the unknown future unfolds. You must give a brief description of each scenario and your reasoning as to why your scenarios are useful in forming a view. "what if... some of the greatest risks come to

fruition what might it be worth to the valuation?"