QUESTION

$[40]$

Mr$.$ Denis Strauss is a SME entrepreneur from Okahandja. $3$ months ago, he was presented with the opportunity to take over the Freezing business of Mr$.$ Grant Van Wyk in Rehoboth. Though excited about the opportunity, Mr$.$ Strauss is currently hesitant of taking it up since he struggles to establish its real value. An acquittance referred him to your office for professional advice.

Consider the following figures from the Adjusted Balance Sheet and Condensed income Statement of Grant Freezers, in order to answer questions $($a$)$ to $($g$)$ below

$[$Determine the Value of the Business for Buy$-$out purposes$]$:

$\backslash$table$[[$Capital$,680000],[$Accumulated profits,$370800],[$Long term loan,$200000]]$

Additional information:

$1$ The salary foregone is N$$90000.$

$2$ Risky investment of $30\%$

$3$ Growth wanted is $45\%$

$\backslash$table$[[$Year$,2019,2018,2017,2016],[$Net Profits,$200910,180210,150510,90400]]$

$12$

$3\mathrm{.}1$ Calculate the following:

$(3\mathrm{.}1\mathrm{.}1)$ Adjustable Tangible Net Worth

$(3\mathrm{.}1\mathrm{.}2)$ Opportunity Cost

$(3\mathrm{.}1\mathrm{.}3)$ Growth Rate $\%$ of Net Profit

$(3)$

$(3\mathrm{.}1\mathrm{.}4)$ Estimated Net Earnings for the next year

$(3)$

$(3\mathrm{.}1\mathrm{.}5)$ Extra Earning Power

$(3)$

$(3\mathrm{.}1\mathrm{.}6)$ Goodwill

$(3)$

$(3\mathrm{.}1\mathrm{.}7)$ Value of the Business

$(3)$