UNIVERSITY OF SOUTH AFRICA (UNISA)
College of Accounting Sciences
⋄
Application of Financial Management
Techniques
Assignment 2 — Semester 2, 2026
⋄
Module Code: MAC3702
Module Name: Financial Management Techniques
Assignment No.: Assignment 2
Due Date: 10 September 2026
Semester: Semester 2, 2026
, lOMoARcPSD|66760720
MAC 3702
ASSIGNMENT 2 – SEMESTER 2
QUESTION 1 (30 Marks)
Ubuntu Health Technologies Ltd (“Ubuntu Health”) is a South African investment company that holds
investments in technology-enabled healthcare and life-sciences businesses. Ubuntu Health has a
30 June financial year-end.
Ubuntu Health’s portfolio includes businesses aligned with health studies/medicine and natural
sciences/biotechnological studies.
BioSense Digital Health (Pty) Ltd (“BioSense”) is an unlisted Tanzanian health-technology company that
develops remote patient-monitoring devices and a cloud-based digital platform. Its technology enables
healthcare providers to monitor patients remotely and access health information through a secure digital
platform. BioSense serves clinics and community health programmes and has established an
independent management team with experience in the health-technology sector.
Possible discontinuation of the existing business
Ubuntu Health is considering discontinuing a small legacy medical-device assembly operation because
its manufacturing costs have increased. The group is exploring the acquisition of a 70% equity stake in
BioSense as part of a strategy to expand its health-technology and digitalisation portfolio.
The acquisition will require appropriate approvals and due diligence, including competition, tax,
regulatory, intellectual-property, data-protection and employment considerations. BioSense is a
Tanzanian company and currently has an independent management team.
For the 2026 financial year, if the legacy operation continues, the expected operating cash loss, excluding
non-cash items, is R1,2 million.
Proposal to acquire 70% equity stake in BioSense
If Ubuntu Health acquires the 70% equity stake in BioSense, the following information will apply:
Information extracted from BioSense’s audited financial statements:
Details Notes 2026 2025 2024 2023
R’000 R’000 R’000 R’000
Net profit before tax (i) 10 000 8 500 8 000 9 000
Dividends paid (ii) 1 000 850 800 900
Notes relating to the above financial information:
1. Included in the net profit after tax for 2026 and 2025 are R3 million and R5 million respectively
(pre-tax) for penalties and remediation costs arising from historical regulatory and quality-control
failures. The corporate income tax rate applicable to BioSense is 25%.
2. BioSense’s dividend payout ratio is expected to remain broadly stable into the future.
3. BioSense’s year-end is 30 June.
4. The average price-earnings multiple of South African listed health-technology and biotechnology
companies used by Ubuntu Health is 12.
5. Unlisted shares in comparable South African businesses are estimated, for this case, to trade at
a 10% discount to comparable listed shares.
6. Ubuntu Health will table a R15 million cash offer for the 70% equity stake in BioSense on
1 September 2026.
7. BioSense’s management team has been with the business since its establishment and is
expected to remain after the acquisition.
3
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, lOMoARcPSD|66760720
MAC 3702
ASSIGNMENT 2 – SEMESTER 2
REQUIRED
Assume that Ubuntu Health acquires the 70% equity stake in BioSense on 1 September 2026:
(a) Using the Price/Earnings (P/E) multiple valuation method, establish the reasonableness of the cash
offer tabled by Ubuntu Health to the shareholders of BioSense for their 70% equity stake in
BioSense at 1 September 2026.
Clearly show all your calculations in detail. Round all workings to two decimals. Where necessary,
indicate irrelevant amounts/adjustments with R0 (nil-value). You also have to clearly indicate the
positive and negative factors affecting the adjusted P/E multiple. (16)
(b) By reference to information evident from the scenario, discuss four (4) non-financial factors that
Ubuntu Health will need to consider in its assessment of BioSense for possible acquisition. (1 mark
for the factor and 1 mark for the application).
You have to list the non-financial factor and explain why this is a non-financial factor for Ubuntu
Health. Give your answers in the following column format. If you do not answer the question as
required, you will receive zero (0) for this question. (8)
Non-financial factor Application to Biosense
(c) Advise Ubuntu Health as to which two other valuation models can be used to establish the
reasonableness of the cash offer for the 70% equity stake in BioSense. Your discussion must
include arguments for and against each of the two other valuation models proposed. (6)
You have to answer your question in the following format. If you do not answer the question as
required, you will receive zero (0) for this question.
Model/Explanation Advantage Disadvantage
TOTAL QUESTION 1 [30]
4
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,UNISA | MAC3702 Financial Management Techniques – Assignment 2
Question 1: Valuation of BioSense Digital Health (30 Marks)
Ubuntu Health is proposing to acquire a 70% equity stake in BioSense, an unlisted Tanzanian
health-technology company, for a cash consideration of R15 million. The reasonableness of
that offer is tested below using the price/earnings (P/E) multiple method, which expresses
the market value of equity as a multiple of the earnings attributable to ordinary shareholders.
The reliability of a P/E valuation depends heavily on whether the earnings used are representa-
tive of sustainable future performance, and on the growth, payout and risk characteristics that
drive the multiple itself (Damodaran, 2026b).
1.1 P/E Multiple Valuation of the 70% Equity Stake
Maintainable earnings
BioSense’s four years of reported profit before tax include abnormal penalties and remediation
costs of R3 million (2026) and R5 million (2025) arising from historical regulatory and quality-
control failures. Because these costs relate to non-recurring, historical events and are sepa-
rately identified in the scenario, they are removed from profit before tax in arriving at main-
tainable earnings. The notes describe the R3 million and R5 million as pre-tax amounts, so the
adjustment is made before tax and the related tax effect is then calculated at the applicable
corporate rate of 25%.
Table 1: Adjustment of profit before tax for non-recurring items
Year Reported PBT (R’000) Less: penalties/remediation (R’000) Adjusted PBT (R’000)
2026 10 000.00 (3 000.00) 7 000.00
2025 8 500.00 (5 000.00) 3 500.00
2024 8 000.00 R0 8 000.00
2023 9 000.00 R0 9 000.00
No adjustment is required for 2024 or 2023 because the scenario does not identify any abnor-
mal items in those years, hence the R0 nil-value entries. Applying the 25% corporate tax rate
to each adjusted PBT figure gives the adjusted profit after tax for each year.
The four years of adjusted earnings are averaged because the assignment deliberately pro-
vides a four-year earnings history, which smooths the effect of any single abnormal year on
the maintainable earnings figure used for valuation purposes:
Page 1 of 6
, UNISA | MAC3702 Financial Management Techniques – Assignment 2
Table 2: Adjusted profit after tax
Year Adjusted PBT (R’000) Tax @ 25% (R’000) Adjusted PAT (R’000)
2026 7 000.00 1 750.00 5 250.00
2025 3 500.00 875.00 2 625.00
2024 8 000.00 2 000.00 6 000.00
2023 9 000.00 2 250.00 6 750.00
5 250 + 2 625 + 6 000 + 6 750
Average adjusted PAT =
4
20 625
=
4
= R5 156.25 thousand
Maintainable earnings for BioSense therefore amount to R5.15625 million.
Adjusted P/E multiple
The average P/E multiple of comparable listed South African health-technology and biotech-
nology companies is 12 times. Because BioSense is unlisted, and unlisted shares in comparable
South African businesses are estimated to trade at a 10% discount to listed shares owing to
their lower liquidity and less observable market pricing, the listed multiple is reduced accord-
ingly:
Unlisted discount = 12.00 × 10% = 1.20
Adjusted P/E = 12.00 − 1.20 = 10.80 times
Equity value of BioSense and the 70% interest
Multiplying the maintainable earnings by the adjusted P/E multiple gives the estimated equity
value of the whole of BioSense:
Page 2 of 6
College of Accounting Sciences
⋄
Application of Financial Management
Techniques
Assignment 2 — Semester 2, 2026
⋄
Module Code: MAC3702
Module Name: Financial Management Techniques
Assignment No.: Assignment 2
Due Date: 10 September 2026
Semester: Semester 2, 2026
, lOMoARcPSD|66760720
MAC 3702
ASSIGNMENT 2 – SEMESTER 2
QUESTION 1 (30 Marks)
Ubuntu Health Technologies Ltd (“Ubuntu Health”) is a South African investment company that holds
investments in technology-enabled healthcare and life-sciences businesses. Ubuntu Health has a
30 June financial year-end.
Ubuntu Health’s portfolio includes businesses aligned with health studies/medicine and natural
sciences/biotechnological studies.
BioSense Digital Health (Pty) Ltd (“BioSense”) is an unlisted Tanzanian health-technology company that
develops remote patient-monitoring devices and a cloud-based digital platform. Its technology enables
healthcare providers to monitor patients remotely and access health information through a secure digital
platform. BioSense serves clinics and community health programmes and has established an
independent management team with experience in the health-technology sector.
Possible discontinuation of the existing business
Ubuntu Health is considering discontinuing a small legacy medical-device assembly operation because
its manufacturing costs have increased. The group is exploring the acquisition of a 70% equity stake in
BioSense as part of a strategy to expand its health-technology and digitalisation portfolio.
The acquisition will require appropriate approvals and due diligence, including competition, tax,
regulatory, intellectual-property, data-protection and employment considerations. BioSense is a
Tanzanian company and currently has an independent management team.
For the 2026 financial year, if the legacy operation continues, the expected operating cash loss, excluding
non-cash items, is R1,2 million.
Proposal to acquire 70% equity stake in BioSense
If Ubuntu Health acquires the 70% equity stake in BioSense, the following information will apply:
Information extracted from BioSense’s audited financial statements:
Details Notes 2026 2025 2024 2023
R’000 R’000 R’000 R’000
Net profit before tax (i) 10 000 8 500 8 000 9 000
Dividends paid (ii) 1 000 850 800 900
Notes relating to the above financial information:
1. Included in the net profit after tax for 2026 and 2025 are R3 million and R5 million respectively
(pre-tax) for penalties and remediation costs arising from historical regulatory and quality-control
failures. The corporate income tax rate applicable to BioSense is 25%.
2. BioSense’s dividend payout ratio is expected to remain broadly stable into the future.
3. BioSense’s year-end is 30 June.
4. The average price-earnings multiple of South African listed health-technology and biotechnology
companies used by Ubuntu Health is 12.
5. Unlisted shares in comparable South African businesses are estimated, for this case, to trade at
a 10% discount to comparable listed shares.
6. Ubuntu Health will table a R15 million cash offer for the 70% equity stake in BioSense on
1 September 2026.
7. BioSense’s management team has been with the business since its establishment and is
expected to remain after the acquisition.
3
Downloaded by Betty Jebet ()
, lOMoARcPSD|66760720
MAC 3702
ASSIGNMENT 2 – SEMESTER 2
REQUIRED
Assume that Ubuntu Health acquires the 70% equity stake in BioSense on 1 September 2026:
(a) Using the Price/Earnings (P/E) multiple valuation method, establish the reasonableness of the cash
offer tabled by Ubuntu Health to the shareholders of BioSense for their 70% equity stake in
BioSense at 1 September 2026.
Clearly show all your calculations in detail. Round all workings to two decimals. Where necessary,
indicate irrelevant amounts/adjustments with R0 (nil-value). You also have to clearly indicate the
positive and negative factors affecting the adjusted P/E multiple. (16)
(b) By reference to information evident from the scenario, discuss four (4) non-financial factors that
Ubuntu Health will need to consider in its assessment of BioSense for possible acquisition. (1 mark
for the factor and 1 mark for the application).
You have to list the non-financial factor and explain why this is a non-financial factor for Ubuntu
Health. Give your answers in the following column format. If you do not answer the question as
required, you will receive zero (0) for this question. (8)
Non-financial factor Application to Biosense
(c) Advise Ubuntu Health as to which two other valuation models can be used to establish the
reasonableness of the cash offer for the 70% equity stake in BioSense. Your discussion must
include arguments for and against each of the two other valuation models proposed. (6)
You have to answer your question in the following format. If you do not answer the question as
required, you will receive zero (0) for this question.
Model/Explanation Advantage Disadvantage
TOTAL QUESTION 1 [30]
4
Downloaded by Betty Jebet ()
,UNISA | MAC3702 Financial Management Techniques – Assignment 2
Question 1: Valuation of BioSense Digital Health (30 Marks)
Ubuntu Health is proposing to acquire a 70% equity stake in BioSense, an unlisted Tanzanian
health-technology company, for a cash consideration of R15 million. The reasonableness of
that offer is tested below using the price/earnings (P/E) multiple method, which expresses
the market value of equity as a multiple of the earnings attributable to ordinary shareholders.
The reliability of a P/E valuation depends heavily on whether the earnings used are representa-
tive of sustainable future performance, and on the growth, payout and risk characteristics that
drive the multiple itself (Damodaran, 2026b).
1.1 P/E Multiple Valuation of the 70% Equity Stake
Maintainable earnings
BioSense’s four years of reported profit before tax include abnormal penalties and remediation
costs of R3 million (2026) and R5 million (2025) arising from historical regulatory and quality-
control failures. Because these costs relate to non-recurring, historical events and are sepa-
rately identified in the scenario, they are removed from profit before tax in arriving at main-
tainable earnings. The notes describe the R3 million and R5 million as pre-tax amounts, so the
adjustment is made before tax and the related tax effect is then calculated at the applicable
corporate rate of 25%.
Table 1: Adjustment of profit before tax for non-recurring items
Year Reported PBT (R’000) Less: penalties/remediation (R’000) Adjusted PBT (R’000)
2026 10 000.00 (3 000.00) 7 000.00
2025 8 500.00 (5 000.00) 3 500.00
2024 8 000.00 R0 8 000.00
2023 9 000.00 R0 9 000.00
No adjustment is required for 2024 or 2023 because the scenario does not identify any abnor-
mal items in those years, hence the R0 nil-value entries. Applying the 25% corporate tax rate
to each adjusted PBT figure gives the adjusted profit after tax for each year.
The four years of adjusted earnings are averaged because the assignment deliberately pro-
vides a four-year earnings history, which smooths the effect of any single abnormal year on
the maintainable earnings figure used for valuation purposes:
Page 1 of 6
, UNISA | MAC3702 Financial Management Techniques – Assignment 2
Table 2: Adjusted profit after tax
Year Adjusted PBT (R’000) Tax @ 25% (R’000) Adjusted PAT (R’000)
2026 7 000.00 1 750.00 5 250.00
2025 3 500.00 875.00 2 625.00
2024 8 000.00 2 000.00 6 000.00
2023 9 000.00 2 250.00 6 750.00
5 250 + 2 625 + 6 000 + 6 750
Average adjusted PAT =
4
20 625
=
4
= R5 156.25 thousand
Maintainable earnings for BioSense therefore amount to R5.15625 million.
Adjusted P/E multiple
The average P/E multiple of comparable listed South African health-technology and biotech-
nology companies is 12 times. Because BioSense is unlisted, and unlisted shares in comparable
South African businesses are estimated to trade at a 10% discount to listed shares owing to
their lower liquidity and less observable market pricing, the listed multiple is reduced accord-
ingly:
Unlisted discount = 12.00 × 10% = 1.20
Adjusted P/E = 12.00 − 1.20 = 10.80 times
Equity value of BioSense and the 70% interest
Multiplying the maintainable earnings by the adjusted P/E multiple gives the estimated equity
value of the whole of BioSense:
Page 2 of 6
