EXCELCENTRE LEARNING INSTITUTE 061 043 9805
PU E
SHI
NG Y L E NC
OU TO THE GATE OF EXC EL
Education is the most powerful weapon which you can use to change the world
,EXCELCENTRE LEARNING INSTITUTE 061 043 9805
WARNING: PLEASE NOTE THAT PLAGIARISM IS A SERIOUS ACADEMIC
OFFENSE, therefore students must use this document ONLY as a guideline. Hence
students have regenerated their own (personalized) solutions paying particular
attention to module contents as prescribed by module facilitators, lecturers and
supervisors. This document’s purpose is to compact all sources of information that
might be relevant to students’ assignments, hence additional knowledge on the
provided information is not restricted by the authors. However, submitting this
document as one’s final work is considered unethical, and students should be
penalized. If this document is plagiarized by the users and fails, EXCELCENTRE
should not be rendered accountable since the contents in this document only give
learners a kick-start on what is expected of them from their areas of specialty.
CAUTION: STUDENTS ARE NOT MANDATED TO USE EVERY DETAIL IN THIS
DOCUMENT IN WRITING THEIR ASSIGNMENT
Education is the most powerful weapon which you can use to change the world
, EXCELCENTRE LEARNING INSTITUTE 061 043 9805
MAC3702 – Managerial Finance
Assignment 2
QUESTION 1
1(a) Reasonableness of the R15 million cash offer for the 70% stake in
BioSense: P/E multiple valuation
The P/E multiple method values a business as: Maintainable earnings × adjusted
earnings multiple (Skae, 2023: 522). Because BioSense is unlisted, the JSE-listed
health-technology/biotechnology sector average P/E multiple of Ubuntu Health's
comparator group is used as the starting point, adjusted first for entity-level differences
and then for owner (shareholder)-level differences such as the lack of marketability of
an unlisted shareholding (Skae, 2023: 527–530).
Determine BioSense's maintainable earnings (after tax)
The penalties and remediation costs relating to historical regulatory and quality-control
failures (2026: R3 000 (R'000); 2025: R5 000 (R'000)) are once-off, non-recurring
items and are not expected to recur. In line with the principle that maintainable
earnings must be sustainable (Skae, 2023: 525), these amounts are added back to
net profit before tax before tax is re-calculated at the current rate of 25%.
R'000 2026 2025 2024 2023
Net profit before tax
10 000.00 8 500.00 8 000.00 9 000.00
(given)
Add back: non-
recurring
3 000.00 5 000.00 R0 (nil) R0 (nil)
penalties/remediation
costs (pre-tax)
Adjusted net profit
13 000.00 13 500.00 8 000.00 9 000.00
before tax
Education is the most powerful weapon which you can use to change the world
PU E
SHI
NG Y L E NC
OU TO THE GATE OF EXC EL
Education is the most powerful weapon which you can use to change the world
,EXCELCENTRE LEARNING INSTITUTE 061 043 9805
WARNING: PLEASE NOTE THAT PLAGIARISM IS A SERIOUS ACADEMIC
OFFENSE, therefore students must use this document ONLY as a guideline. Hence
students have regenerated their own (personalized) solutions paying particular
attention to module contents as prescribed by module facilitators, lecturers and
supervisors. This document’s purpose is to compact all sources of information that
might be relevant to students’ assignments, hence additional knowledge on the
provided information is not restricted by the authors. However, submitting this
document as one’s final work is considered unethical, and students should be
penalized. If this document is plagiarized by the users and fails, EXCELCENTRE
should not be rendered accountable since the contents in this document only give
learners a kick-start on what is expected of them from their areas of specialty.
CAUTION: STUDENTS ARE NOT MANDATED TO USE EVERY DETAIL IN THIS
DOCUMENT IN WRITING THEIR ASSIGNMENT
Education is the most powerful weapon which you can use to change the world
, EXCELCENTRE LEARNING INSTITUTE 061 043 9805
MAC3702 – Managerial Finance
Assignment 2
QUESTION 1
1(a) Reasonableness of the R15 million cash offer for the 70% stake in
BioSense: P/E multiple valuation
The P/E multiple method values a business as: Maintainable earnings × adjusted
earnings multiple (Skae, 2023: 522). Because BioSense is unlisted, the JSE-listed
health-technology/biotechnology sector average P/E multiple of Ubuntu Health's
comparator group is used as the starting point, adjusted first for entity-level differences
and then for owner (shareholder)-level differences such as the lack of marketability of
an unlisted shareholding (Skae, 2023: 527–530).
Determine BioSense's maintainable earnings (after tax)
The penalties and remediation costs relating to historical regulatory and quality-control
failures (2026: R3 000 (R'000); 2025: R5 000 (R'000)) are once-off, non-recurring
items and are not expected to recur. In line with the principle that maintainable
earnings must be sustainable (Skae, 2023: 525), these amounts are added back to
net profit before tax before tax is re-calculated at the current rate of 25%.
R'000 2026 2025 2024 2023
Net profit before tax
10 000.00 8 500.00 8 000.00 9 000.00
(given)
Add back: non-
recurring
3 000.00 5 000.00 R0 (nil) R0 (nil)
penalties/remediation
costs (pre-tax)
Adjusted net profit
13 000.00 13 500.00 8 000.00 9 000.00
before tax
Education is the most powerful weapon which you can use to change the world
