Manufacturing – For a business of this quality and having taken all of the aforementioned factors, over- shadowed by a weakening economy as they are, into consideration, a price/earnings ratio of 2.5 x will, represent fair value to a serious buyer.
This is a rare opportunity to purchase such a great business below market value. The seller has reduced the asking price to R5 500 000 which is R1 400 000 less than the fair market value, to achieve a faster sale.
Therefore, considering Net Profit after tax of R2.747.529 x 2.5 = R6.868.823, or R6.9m. This amount includes all office and factory equipment, tooling and vehicles, but excludes stock of steel and other metal, and work in progress.
It also assumes that the business will be debt-free and all of its assets unencumbered on the date when it is sold to a buyer.