Module 6 SSGC Case Part B SAMPLE_Solution_F22

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1fff7117e33a76cfd2b583166b681a4e0d2dbbdf.xlsx M6 Exhibit 1 SSGC Fin Stmts 1 Silver Sticks Golf Club (SSGC) For years-ended October 31 Income Statement 2019 2020 2021 Revenue Membership fees (Note 1) $ 4,100,000 $ 4,200,000 $ 4,140,000 Food and beverage sales 640,000 350,000 427,500 Total revenue 4,740,000 4,550,000 4,567,500 Management, Admin & Golf Salaries 563,750 577,844 592,290 Food & Beverage - cost of sales 326,400 168,000 213,750 Food & Beverage - salaries & wages 252,350 172,000 197,000 Golf Course part-time wages 856,800 873,936 891,415 Golf course maintenance, water, and fuel 735,000 786,450 872,959 Marketing, general & admin expenses 204,750 214,987 225,737 Depreciation (Note 2) 834,500 883,000 1,003,500 Operating income (EBIT) 966,450 873,783 570,849 Interest expense 263,500 232,500 215,900 Net Income (pre-tax) 702,950 641,283 354,949 Balance Sheet Assets 2019 2020 2021 Cash and equivalents $ 804,240 $ 823,043 $ 868,402 Inventory - food and beverage 36,000 25,000 30,000 Total Current Assets 840,240 848,043 898,402 Property, Plant & Equipment, Net Book Value (Note 2) 3,103,000 2,705,000 2,906,500 Land 8,500,000 8,500,000 8,500,000 Total assets 12,443,240 12,053,043 12,304,902 Liabilities and Equity Accounts Payable $ 10,800 $ 6,900 $ 10,200 Interest Payable 21,960 19,380 17,990 Current portion of long-term debt 775,000 775,000 855,000 Current liabilities 807,760 801,280 883,190 2020 Long-term debt 5,425,000 4,650,000 4,515,000 ### 6,601.76 Common shares 5,000,000 5,000,000 5,000,000 Retained earnings 1,210,480 1,601,763 1,906,712 2,021 Total shareholders equity 6,210,480 6,601,763 6,906,712 ### 6,906.71

1fff7117e33a76cfd2b583166b681a4e0d2dbbdf.xlsx M6 Exhibit 1 SSGC Fin Stmts 2 Total liabilities and equity 12,443,240 12,053,043 12,304,902

1fff7117e33a76cfd2b583166b681a4e0d2dbbdf.xlsx M6 Exhibit 1 SSGC Fin Stmts 3 Statement of Retained Earnings For years-ended October 31 2020 2021 Opening balance 1,210,480 1,601,763 Net income for the period 641,283 354,949 SSGC 1000 Dividends (250,000) (50,000) Sid 100 Closing balance 1,601,763 1,906,712 For years-ended October 31 2020 Statement of Cash Flows 2020 2021 (250,000) (250.00) Operating cash flow Net income $ 641,283 $ 354,949 2021 Depreciation 883,000 1,003,500 (50,000) (50.00) Change in inventory 11,000 (5,000) Change in accounts payable (3,900) 3,300 Change in interest payable (2,580) (1,390) 1,528,803 1,355,359 Investing cash flows Purchase of property, plant & equipment (485,000) (1,205,000) Financing cash flows Proceeds additional bank loan 800,000 Increase/(decrease) current portion of LTD - 80,000 Increase/(decrease) long-term portion of LTD (775,000) (935,000) Dividends paid (250,000) (50,000) (1,025,000) (105,000) Net change in cash and equivalents 18,803 45,359 Opening cash balance 804,240 823,043 Closing cash balance $ 823,043 $ 868,402 - - NOTE 1 - Membership Stats 2019 2020 2021 Number of Members (start of year) 400 400 400 Number of Members discontinuing membership 12 15 65 Number of Continuing Members 388 385 335 Number of New Members (joined during year) 12 15 10

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1fff7117e33a76cfd2b583166b681a4e0d2dbbdf.xlsx M6 Exhibit 1 SSGC Fin Stmts 4 Total Number of Members 400 400 345 NOTE 2 - Property, Plant & Equipment 2019 2020 2021 Property, Plant & Equipment - Golf Operations Gross Book Value - opening $ 12,550,000 $ 13,050,000 $ 13,525,000 Accumulated Depreciation - opening (9,655,000) (10,360,000) (11,112,500) Additions/Disposals 500,000 475,000 405,000 Depreciation Expense 705,000 752,500 793,000 Net Book Value - PP&E Golf Operations 2,690,000 2,412,500 2,024,500 Property, Plant & Equipment - Food & Beverage Gross Book Value - opening $ 2,525,000 $ 2,545,000 $ 2,555,000 Accumulated Depreciation - opening (2,002,500) (2,132,000) (2,262,500) Additions/Disposals 20,000 10,000 800,000 Depreciation Expense 129,500 130,500 210,500 Net Book Value - PP&E Food & Beverage 413,000 292,500 882,000 Total Depreciation $ 834,500 $ 883,000 $ 1,003,500 Total Net Book Value 3,103,000 2,705,000 2,906,500

1fff7117e33a76cfd2b583166b681a4e0d2dbbdf.xlsx M6 Exhibit 1 SSGC Fin Stmts 5 (25,000.00) (5,000.00)

Silver Sticks Golf Club (SSGC) Business Valuation Summary As at October 31 2019 2020 2021 SSGC Equity Value $ 9,670,000 $ 11,140,000 $ 12,810,000 Total Shares Outstanding 1,000 1,000 1,000 Estimated Market Value per Share $ 9,670 $ 11,140 $ 12,810 Total shares $ 967,000 $ 1,114,000 $ 147,000 18% $ 1,470 $ 1,281,000 $ 167,000 15%

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Silver Sticks Golf Club (SSGC) Analysis of Investment for Sid Gilmour 1. Summary of Initial Transaction 2001 SSGC Sid Total # of Shares Issued 1,000 100 Original Value Common Shares $ 5,000,000 $ 500,000 Original Value per Common Share $ 5,000 $ 5,000 2. Calculation of BV per share SSGC 2020 SSGC 2021 % Change Book Value Shareholders' Equity $ 6,601,763 $ 6,906,712 Total # of Shares Outstanding 1,000 1,000 Book Value per Share $ 6,602 $ 6,907 4.6% 3. Dividends paid on Sid's shares SSGC 2020 SSGC 2021 Dividends paid during the year $ 250,000 $ 50,000 Dividends paid per Share $ 250 $ 50 Dividends Received on 100 shares $ 25,000 $ 5,000 4(a) Determination of Total Return to Investor 2020 2021 Market Value per share @ beginning of year $ 9,670 $ 11,140 Market Value per share @ end of year $ 11,140 $ 12,810 Increase in Market Value per share $ 1,470 $ 1,670 Total Return (TR) to Investor Sid 2020 Sid 2021 Average Shares Owned 100 100 Dividends Received on 100 shares $ 25,000 $ 5,000 Change in Value of 100 Shares $ 147,000 $ 167,000 Dividends + Change in Value of Shares $ 172,000 $ 172,000 Market Value of Shares @ beginning of year $ 967,000 $ 1,114,000 Total Return 17.8% 15.4% 17.8% 4(b) Calculation of Dividend Yield Sid 2020 Sid 2021 Dividend per Share 250 50 Market Value per Share end of year $ 11,140 $ 12,810 % Yield 2.2% 0.4%

Notes: 10 shareholders, 100 shares each 10 shareholders, $500K each Module 6 Exhibit 1 Module 6 Exhibit 1 Module 6 Exhibit 2 Module 6 Exhibit 2

Silver Sticks Golf Club (SSGC) Analysis of Investment for Sid Gilmour - Seminar Discussion SSGC BV and MV per share 2020 2021 Change Source [tab] Book Value per Share $ 6,602 $ 6,907 4.6% M6 Sample Analysis SSGC TR Market Value per Share $ 11,140 $ 12,810 15.0% M6 Exhibit 2 Valuation Report Total Return (TR) to Investor 2020 2021 Average Source [tab] Sid's investment in SSGC 17.8% 15.4% 17.8% M6 Sample Analysis SSGC TR Investment in Zoom Nov 1, 2019 554.8% -40.4% 145.1% M6 Seminar TR Zoom Investment in TWC Nov 1, 2019 -17.2% 58.5% 15.5% M6 Seminar TR TWC Club Link Analysis: Zoom vs SSGC Overall, Zoom has performed quantitatively better over the two year period than Silver Sticks (Two year return average of 145% vs 18%, an Qualitative factors to consider: (list is not exhaustive) Zoom is higher risk, but higher reward: -technology stocks have more volatility in share price -Zoom in particular had big swings year over year. (grew by 5x in 2020; dropped in half 2021).

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-tech companies can be significantly impacted by trends/fads (both positive & negative). Golf courses are more stable. Type of investment income -SSGC pays out dividends (decreased in 2021, but presumably one-time decrease), but Zoom does not. -Some investors prefer dividend income to capital gains Private vs Public Company -Public company shares are more liquid: Zoom shares can be sold immediately; but it will take longer to sell SSGC shares. -Sid Gilmour owns 1/10th of SSGC, so has more influence over SSGC (and none over Zoom) Analysis: TWC vs SSGC: Overall, SSGC performed quantitatively better over the two year period than TWC. -TWC faced more volatility -Assuming SSGC returns to their higher level of dividends; their dividend income is better than TWC. -Public company shares are more liquid: TWC shares can be sold immediately; but it will take longer to sell SSGC shares. Conclusion Sid earned a reasonable return on his investment in SSGC. -Return is better than other golf course investments; with higher average dividends. -Return is far less risky than Zoom, and there is no certainty that Zoom will perform as well in the future as they did in 2020.

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Total Return from Zoom Communications for Seminar Discussion Share prices Closing Price Change YoY Dividends per Share 11/01/2019 Zoom Video Communications Inc 70.39 10/30/2020 Zoom Video Communications Inc 460.91 390.52 $ - 10/29/2021 Zoom Video Communications Inc 274.65 - 186.26 $ - Number of Shares Purchased if Sold SSGC shares Oct 31, 2019 Market Value of SSGC shares - Oct 31, 2019 $ 967,000 Market Value per Zoom Share - Nov 1, 2019 $ 70.39 Number of Zoom shares purchased (rounded) 13,738 Analysis of Shareholder Return 2020 2021 2 years Notes: Total Return (TR) to Investor Shares Owned 13,738 13,738 13,738 Dividends Received $ - $ - $ - Zoom doesn't pay d Change in Market Value of Shares $ 5,364,964 $ (2,558,840) $ 2,806,124 Annual Total Return $ 5,364,964 $ (2,558,840) $ 2,806,124 Market Value of Shares @ beginning of year $ 967,018 $ 6,331,982 $ 967,018 2 year return on shares 290.2% Annual Total Return on shares 554.8% -40.4% 145.1% average, not CAGR

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dividends

Total Return from TWC Enterprises (Club Link) for Seminar Discussion Share prices Closing Price Change YoY Dividends per Share 11/01/2019 TWC Enterprises Ltd 13.75 10/30/2020 TWC Enterprises Ltd 11.31 - 2.44 $ 0.08 10/29/2021 TWC Enterprises Ltd 17.85 6.54 $ 0.08 Number of Shares Purchased if Sold SSGC shares Oct 31, 2019 Market Value of SSGC shares $ 967,000 Market Value per TWC Share $ 13.75 Number of TWC shares purchased (rounded) 70,327 Analysis of Shareholder Return 2020 2021 2 years Notes: Total Return (TR) to Investor Shares Owned 70,327 70,327 70,327 Dividends Received $ 5,626 $ 5,626 $ 11,252 Change in Market Value of Shares $ (171,598) $ 459,939 $ 288,341 Annual Total Return $ (165,972) $ 465,565 $ 299,593 Market Value of Shares @ beginning of year $ 966,996 $ 795,398 $ 966,996 2 year return on shares 31.0% Annual Total Return on shares -17.16% 58.5% 15.5% average, not CAGR