MAC3702 ASSIGNMENT 2
SEMESTER 2 - 2023
UNIQUE NUMBER: 753073
DUE DATE: 18 SEPTEMBER 2023
,MAC3702 ASSIGNMENT 2
UNIQUE NUMBER: 753073
CLOSING DATE: 18 SEPTEMBER 2023
MARKS: 100
QUESTION 1:
(a) Recommend the maximum purchase price for the acquisition of Deep-zone (Pty)
Limited. Support your opinion with relevant calculations and provide reasons for
your answer. (15)
To: Directors of Level II (Pty) Limited
Subject: Valuation and Acquisition of Deep-zone (Pty) Limited
Prepared by: MAC3702 Student
Date: 18 September 2023
Dear Directors,
I am writing to provide a comprehensive report regarding the valuation and acquisition of
Deep-zone (Pty) Limited. In this report, I will recommend the maximum purchase price that
Level II should consider for acquiring a 100% stake in Deep-zone (Pty) Limited. I will support
this recommendation with relevant calculations and provide a rationale for the proposed
purchase price.
1
, METHOD 1 - Incremental Approach
ITEMS NOTES RAND
Net Profit 189 750
Less: Raw material – supplier A 1 51 750
Raw material – supplier B 2 (11 500)
Labour costs 3 (43 125)
Marketing costs 4 10 350
Depreciation (non-cash item) 92 000
Share of head office costs (non-cash allocation) 34 500
Annual Cash Flows 323 725
Present value of the cash flows:
6 150 775
Manufacturing equipment 23 000
Maximum Purchase Price 6 173 775
2
SEMESTER 2 - 2023
UNIQUE NUMBER: 753073
DUE DATE: 18 SEPTEMBER 2023
,MAC3702 ASSIGNMENT 2
UNIQUE NUMBER: 753073
CLOSING DATE: 18 SEPTEMBER 2023
MARKS: 100
QUESTION 1:
(a) Recommend the maximum purchase price for the acquisition of Deep-zone (Pty)
Limited. Support your opinion with relevant calculations and provide reasons for
your answer. (15)
To: Directors of Level II (Pty) Limited
Subject: Valuation and Acquisition of Deep-zone (Pty) Limited
Prepared by: MAC3702 Student
Date: 18 September 2023
Dear Directors,
I am writing to provide a comprehensive report regarding the valuation and acquisition of
Deep-zone (Pty) Limited. In this report, I will recommend the maximum purchase price that
Level II should consider for acquiring a 100% stake in Deep-zone (Pty) Limited. I will support
this recommendation with relevant calculations and provide a rationale for the proposed
purchase price.
1
, METHOD 1 - Incremental Approach
ITEMS NOTES RAND
Net Profit 189 750
Less: Raw material – supplier A 1 51 750
Raw material – supplier B 2 (11 500)
Labour costs 3 (43 125)
Marketing costs 4 10 350
Depreciation (non-cash item) 92 000
Share of head office costs (non-cash allocation) 34 500
Annual Cash Flows 323 725
Present value of the cash flows:
6 150 775
Manufacturing equipment 23 000
Maximum Purchase Price 6 173 775
2
