Exam (elaborations)
FIN3701 Assignment 1 S2 2023
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the document contains solution for assignment 1 S2 2023
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, Table of ContentsQuestion 1.....................................................................................................................3
1.1 The book value of the existing machine.............................................................3
1.2 the tax implication from the sale of the existing machine...................................3
1.3 The after-tax proceeds from the sale of the existing machine............................4
1.4 The initial investment associated with the replacement of the existing machine
...................................................................................................................................4
Question 2.....................................................................................................................5
2.1The terminal cash flow from the use of the new grinding machine is R30 000.. .5
Question 3.....................................................................................................................6
Question 4.....................................................................................................................7
4.1 The current price of Titan Mining Corporation’s ordinary share.........................7
4.2 Should Bonga purchase Titan Mining Corporation shares to include in his
investment.................................................................................................................8
Question 5.....................................................................................................................8
5.1 The component costs associated with capital investments financing................9
5.2 The weighted average cost of capital (WACC)...................................................9
5.3 The WACC, the break-point of equity and the break-point of debt under the
proposed structure..................................................................................................10
5.4 The number of shares under the current structure...........................................12
5.5 The number of shares under the proposed structure.......................................13
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