Question 1 – 25 marks Only answers in the Exprep portal will be marked.  This is for information purposes only.  Lexi is a high-net-worth client of your firm and is considering the acquisition of Christina’s floral business – Lily Inc. (“Lily”). Lexi has asked you to analyze the value of the company at the most recent fiscal year end. Lily was founded 10 years ago. Lily has built a reputation for fulfilling orders quickly and within customer specifications. Sales are generally made in response to requests for quotations and to repeat customers. Customers are satisfied with Lily’s quality and service and tell management they plan to continue doing business with Lily. Required Determine the FMV of Lily as of Dec. 31 20X1.  In point form, indicate the selected valuation methodology used and why.  You are required to use the levered approach under the methodology selected.  Comment on the reasonableness of the implied goodwill. A formal valuation report is not required at this time.  Relevant Information • General administration expenses include management bonuses paid of $25,000 every year. These payments are over and above market rates. • Depreciation approximates capital cost allowance for tax purposes and sustaining capital reinvestment requirements. • Investment income is derived from marketable securities. • Market value of securities is approximated by book value. • All cash is required for operations of the business. • Net book value of property and equipment represents their fair market value. • UCC is approximately equal to book values, and average CCA rate is 25% • Unlevered cost of equity is 18%; levered cost of equity is 20%. Ideal debt to equity ratio for the industry is 0.5:1. The industry WACC range is 17% to 18%. • Lily has an unused secured line of credit at 4%.  Current rates would be 5%. • Effective combined Federal and Provincial tax rate is 27% Lily’s financial statements are found on Schedule 1. Lily Inc. – Historical Income Statements (in thousands) For the fiscal years ended Dec 31, 20X8 20X9 20X0 20X1 Revenue     3,200     3,500     3,800     3,700 Cost of sales   (1,650)   (1,850)   (2,100)   (2,000) Gross Profits     1,550     1,650     1,700     1,700 General and administrative costs      (450)         (50)      (500)      (475) Depreciation      (325)      (300)      (370)      (250) Investment income        100        120        115        125 Net Income before taxes        875     1,420        945     1,100 Income taxes (27%)      (236)      (383)      (255)      (297) Net Income        639     1,037        690        803 Lily Inc. – Historical Balance Sheet As at Dec. 31, 20X1 Assets  Current Assets Cash        100 Marketable Securities        500 Accounts receivable       400 Inventory (flowers)       350 Prepaid expenses         50   1,400 Property and equipment   1,600 Total assets   3,000 Liabilities Current Liabilities Accounts payable       300 Accrued liabilities       200 Shareholder’s Equity Common Shares         10 Retained Earnings   2,490 Total liabilities and shareholder’s equity   3,000

Question 2 – 20 marks Only answers in the Exprep portal will be marked.  This is for information purposes only.   You are valuing a distillery company Deviation Gin Inc. (DGI).  They have received an unsolicited offer of $100million from an international company.  A partner in your firm told you that she spoke with a few key players in the market and they told her as a rule of thumb, the equity in a distillery is typically sell for 2.5x revenues and 20.0x EBIT.  DGI has told you that they haven’t been replacing their capital as much as they should’ve been over the years and plan to spend about $300,000 per year on replacing some old equipment for the foreseeable future.  The owner of DGI has always invested any excess cash in different marketable securities.  The current market value of these assets is $33.8 million.  If DGI were to sell these investments it’s estimated that taxes and costs to sell these investments would be about 15% of market value.  Required Provide a valuation of DGI at the year end 20X2 using the unlevered approach.  While you must use an unlevered approach, in point form determine which method is most appropriate.   Consider the rule of thumb approach suggested by your partner.  Estimate the value of DGI using these alternative approaches and comment on their appropriateness.   Relevant Information •Combined effective tax rate is 23.0% •Average CCA rate is 20.0% •Long-term treasury bill rate: 2.1% •Cost of levered equity is 17.5% •Forecast CPI rate: 2.5% •Cost of debt: 3.5% •Industry optimal capital structure is 60% equity and 40% debt •UCC balance is equivalent to balance sheet values DGI – Historical Income Statements (in thousands) For the fiscal years ended Dec 31, 20X8 20X9 20X0 20X1 20X2 Revenue               25,300               28,880               32,080               36,580               40,692 Cost of Goods Sold               16,400               18,780               20,768               23,373               26,005 Operating Profit                 8,900               10,100               11,313               13,208               14,687 SG&A                 5,766                 6,061                 7,038                 7,215                 7,437 EBITDA                 3,134                 4,039                 4,275                 5,993                 7,250 Amortization                     150                     161                     163                     162                     168 EBIT                  2,984                 3,878                 4,112                 5,831                 7,082 Investment Income                     192                     214                     185                     222                     203 Interest Paid                       96                       92                       83                       74                       66 EBT                 3,080                 4,000                 4,214                 5,979                 7,219 Tax                     708                     920                     969                 1,375                 1,660 Net Income                 2,372                 3,080                 3,245                 4,604                 5,559 DGI – Historical Balance Sheet (in thousands) For the fiscal years ended Dec 31, 20X2 Assets  Current Assets Cash                        8,328 Marketable Securities                        9,183 Accounts receivable                    36,238 Inventory                    16,380                    70,129 Property and equipment                       3,923 Total assets                    74,052 Liabilities Current Liabilities Accounts payable                    59,960 Current Portion of Long-Term Debt                          250                    60,210 Shareholder loan                       3,368 Long-Term Debt                       1,500                    65,078 Shareholder’s Equity Common Shares                          100 Retained Earnings                       8,874 Total liabilities and shareholder’s equity                    74,052

Question 3 – 15 marks  Only answers in the Exprep portal will be marked.  This is for information purposes only.  You are working on finding a group of comparable companies for BitFit.  A description of BitFit is found below.  Also, you will find a brief description of 5 different possible comparable companies.  For each possible comparable company, determine if it is or is not appropriate to use as a comparable.  For each company be specific as to why you think it would or would not be appropriate to use.     Required For each possible comparable company, determine if it is or is not appropriate to use as a comparable.  For each company be specific as to why you think it would or would not be appropriate to use.  No estimate of value for BitFit is required at this time.    Comparable companies financial data is found in schedule 3.  BitFit BitFit is a technology company focused on delivering health solutions. The company was founded in 2007 and is headquartered in San Francisco, California. BitFit currently ranks fifth in the global wearables market with a 4.1% market share and over 50 million registered users.   The BitFit platform combines wearable devices with software and services. The company’s wearable devices, which include health and fitness trackers and smartwatches, enable its users to view data about their daily activity, exercise and sleep in real-time. The company’s software and services, which include an online dashboard and mobile app, provide its users with data analytics, motivational and social tools, and virtual coaching through customized fitness plans and workouts. The company sells its products through consumer electronics stores, sporting goods retailers and an online store.   BitFit has had issues maintaining growth in recent years. The company first pioneered and then dominated the wrist-worn tracker space, but in more recent years it has struggled as the smartwatches category has grown and taken over BitFit’s tracker territory.   To combat contracting gross margins, and fierce competition from bigger rivals eating away at its high- and low-end markets, BitFit is now turning its attention to improving monetization of its active user base of over 28 million. The need to build a stronger subscription business has also been apparent for quite some time.   Last fiscal year BitFit reported a loss but this year it had reported revenue of $1.5billion and an EBITDA of $96 million.  The company has 260 million shares outstanding.  Recently it has been trading at $2.80 a share but for most of the last two years it has been hovering just below $7.00.  The company currently has net tangible assets of $870 million and a net debt of $464 million   GoBro Inc.  GoBro Inc. develops and sells cameras, drones, and mountable and wearable accessories in the United States and internationally. The company offers a cloud-connected line of camera and cloud-based storage solution that enables subscribers to access, edit, and share content. GoBro Inc. markets and sells its products through retailers and wholesale distributors, as well as through its Website. was founded in 2004 and is headquartered in San Mateo, California.   PineApple Inc Pineapple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. The company offers a line of smartphones, personal computers, multi-purpose tablets; and wearables, home, and accessories. It also provides digital content stores and streaming services. The company serves consumers, and small and mid-sized businesses. The company also sells its products through its retail and online stores, and direct sales force. Pineapple Inc. was founded in 1977 and is headquartered in Cupertino, California.   Gamin Gamin Ltd. operates through several segments which design, develop, manufacture, market, and distribute a range of navigation, communication, and information devices worldwide. The Fitness segment provides running/multi-sport watches, cycling computers, cycling power meters, cycling safety and awareness products, and activity tracking devices. The company sells its products to retail outlets; and through a network of independent dealers and distributors. Gamin Ltd. was founded in 1990 and is based in Schaffhausen, Switzerland.   Dami Dami Corporation, a biometric and activity data-driven company, develops, manufactures, and sells smart wearable technological devices in China. The company offers smart bands, watches, and scales; and a range of accessories, including bands, watch straps, necklaces, sportswear, etc. It provides charts and graphs to display analysis of the activity and biometric data collected from users through its mobile apps. Dami Corporation has strategic collaborations to develop smart watches and co-branded intelligent, data-driven, and customized performance optimization solutions and wearable technologies. The company was founded in 2013 and is headquartered in Hefei, China.   Vuxiz Corporation Vuxiz Corporation designs, manufactures, markets, and sells augmented reality (AR) wearable display devices in North America and internationally. The company offers its products in the form of smart glasses and AR glasses. Its AR wearable display devices are worn like eyeglasses or attach to a head worn mount to view, record, and interact with video and digital content, such as computer data, the Internet, social media, and entertainment applications. In addition, the company offers an app store on its Websites, which enables users to download and purchase applications, including third party applications; Vuxiz Corporation offers its products directly to end customers, as well as through specialty retailers, online retailers, distributors, value added resellers, and Web stores. Vuxiz Corporation was founded in 1997 and is headquartered in West Henrietta, New York. Comparable Companies’ financial data Company Name Share Price Shares Outstanding (millions) Net Debt ($M) Revenue ($M)  EBITDA($M)  GoBro Inc. 4.46 144.9 87.9 1,198.5 12.0 PineApple Inc. 57.13 443.3 490.0 260,174.0 76,477.0 Gamin Ltd. 93.29 190.1 1330.7 3,587.4 994.1 Dami Corporation 9.33 61.3 208.6 590.4 62.1 Vuxiz Corporation 2.50 33.1 2.7 7.5 19.6

pH is equal to

A city has determined that it’s optimal chlorine (Cl2) levels in their drinking water should be ppm.  If the city uses million gallons of water per day, what mass of chlorine in kg would be added to their drinking water each day?   (density of water is 3785.4 gram per gallon) million = 106 Enter your answer with at least 3 sig figs.  

which hydroxide is amphotheric (dissolves in excess and excess )?

Taking proper measurement means

which of the following is/are the thing(s) we consider in choosing a solvent (for recrystallization and others):

which of the following can be safely poured down the drain?

A precipitate is