MAC3702 ASSIGNMENT 2 SEMESTER 2 - 2023 (753073)

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