FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 (232195) - DUE 20 August 2024
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Course
FIN3701 Assignment 1 Semester 2
Institution
University Of South Africa
FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 (232195) - DUE 20 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App
QUESTION 1 [20 marks] Batlokwa Industries wishes to select one of three possible machines, each of which is expected to s...
, FIN3701 Assignment 1 (COMPLETE ANSWERS)
Semester 2 2024 (232195) - DUE 20 August 2024 ;
100% TRUSTED Complete, trusted solutions and
explanations. For assistance, Whats-
QUESTION 1 [20 marks]
Batlokwa Industries wishes to select one of three possible machines, each
of which is expected to satisfy the firm’s ongoing need for additional
aluminium extrusion capacity. The three machines, A, B and C, are equally
risky. The firm plans to use a 12% cost of capital to evaluate each of them.
The initial investment and annual cash inflows over the life of each machine
are shown in the following table: Year Machine A Machine B Machine C 0
(R92 000) (R65 000) (R100 500) 1 R12 000 R10 000 R30 000 2 R12 000
R20 000 R30 000 3 R12 000 R30 000 R30 000 4 R12 000 R40 000 R13
000 5 R12 000 - R30 000 6 R12 000 - REQUIRED: 1.1 Calculate the NPV
for each of the three projects. (9 marks) 1.2 Calculate the annualised net
present value (ANPV) of each machine. (9 marks) 1.3 Based on the NPV
and IRR calculated above, would you advise Batlokwa (Pty) Ltd to invest
their funds in the replacement? Give a reason for your answer. (2 marks)
THERE ARE TWO COMPULSORY ASSIGNMENTS FOR THE SECOND
SEMESTER. The purpose of this assignment is to evaluate your
knowledge of the fundamental aspects of decision-making for long-term
investment. Study chapters 9, 10, 11 and 12 in the prescribed book as well
as the relevant learning units to complete this assessment. 11
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