FIN3701
ASSIGNMENT 1 SEMESTER 1 2023
, FIN3701
Assignment 1 Semester 1 2023
Unique Number: 842216
PREVIEW
Merck Ltd is a manufacturer of high-quality plastic products made to demanding
specifications, which makes replication of designs difficult. The company relies on
marketing programmes to ensure that models are constantly changed, and that demand
follows new designs. This allows the company to maintain margins in a highly competitive
environment.
Merck Ltd is considering the replacement of outdated equipment, which will allow the firm
to manufacture a new line of products. The cost of the new equipment is R8,5 million and
the company qualifies for a depreciation deduction of 40% of cost for the first year, and
20% in each of the subsequent three years. The equipment is also expected to result in
the sales revenue of R5 950 000 and total operational cost of R2 480 000 per annum
before tax for another four years, when the life of this product line is expected to end. The
expected after-tax proceeds from the sale of the new equipment amounts to R1 512 000
in four years’ time.
ASSIGNMENT 1 SEMESTER 1 2023
, FIN3701
Assignment 1 Semester 1 2023
Unique Number: 842216
PREVIEW
Merck Ltd is a manufacturer of high-quality plastic products made to demanding
specifications, which makes replication of designs difficult. The company relies on
marketing programmes to ensure that models are constantly changed, and that demand
follows new designs. This allows the company to maintain margins in a highly competitive
environment.
Merck Ltd is considering the replacement of outdated equipment, which will allow the firm
to manufacture a new line of products. The cost of the new equipment is R8,5 million and
the company qualifies for a depreciation deduction of 40% of cost for the first year, and
20% in each of the subsequent three years. The equipment is also expected to result in
the sales revenue of R5 950 000 and total operational cost of R2 480 000 per annum
before tax for another four years, when the life of this product line is expected to end. The
expected after-tax proceeds from the sale of the new equipment amounts to R1 512 000
in four years’ time.
