Exam (elaborations)
FIN3701 EXAM PACK 2023
- Course
- Institution
ELABORATE QUESTIONS & ANSWERS
[Show more]
Seller
Follow
Lela40
Reviews received
Content preview
FIN3701EXAM PACK
2023
ELABOATE QUESTIONS & ANSWERS
FOR ASSISTANCE WHATSAPP 0700422256
, Stuvia.com - The study-notes marketplace
Page 4 of 31
FIN3701
CONFIDENTIAL MAY/JUNE 2022
QUESTION 1 [10 marks]
GoldStar Construction Ltd seeks to replace a grinding machine purchased two years ago for
R76 000 with a new one. The existing grinding machine has a useful life of four years and can
be sold today for R55 000 with removal costs of R4 000. The machine was being depreciated
over a four-year straight-line period.
The cost price of the new grinding machine is R80 000 and will be depreciated over its five year
useful life using a straight line method. It will have no residual value and will be worth R0 at the
end of its five year useful life. The use of the new grinding machine is expected to increase
current assets to R30 000 and current liabilities to R80 000.
GoldStar Construction is in the 40% tax bracket.
REQUIRED:
1.1 Calculate the terminal cash flow from the use of the new grinding machine. Show all
calculations. (10 marks)
[TURN OVER]
Downloaded by: reception59 | reception@nkbaynes.co.za Want to earn
Distribution of this document is illegal R13,625 per year?
, Stuvia.com - The study-notes marketplace
Page 5 of 31
FIN3701
CONFIDENTIAL MAY/JUNE 2022
[TURN OVER]
Downloaded by: reception59 | reception@nkbaynes.co.za Want to earn
Distribution of this document is illegal R13,625 per year?
, Stuvia.com - The study-notes marketplace
Page 6 of 31
FIN3701
CONFIDENTIAL MAY/JUNE 2022
QUESTION 2 [12 marks]
A firm with cost of capital of 10% is evaluating two mutually exclusive projects, X and Y. The
initial investment is R350 000 for project X and R425 000 for project Y. Cash inflows
associated with the two projects are given below.
Year Project X Project Y
Cash inflows (R) Cash inflows (R)
1 140 000 175 000
2 165 000 150 000
3 190 000 125 000
4 100 000
5 75 000
6 50 000
REQUIRED:
2.1 Which project should the firm choose, based on their Annualised NPVs? (12 marks)
[TURN OVER]
Downloaded by: reception59 | reception@nkbaynes.co.za Want to earn
Distribution of this document is illegal R13,625 per year?
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Lela40. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.50. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
83637 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now