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FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 - DUE 20 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. R45,45   Add to cart
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FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 - DUE 20 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.

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FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 - DUE 20 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.

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  • July 21, 2024
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  • 2023/2024
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 Principles of Managerial Finance

FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 - DUE 20
August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.



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

To evaluate the three machines, we'll calculate the Net Present Value (NPV) and Annualized Net
Present Value (ANPV) for each. Here’s how to do it:

1.1 Calculate the NPV for Each Machine

NPV Formula:

NPV=∑Ct(1+r)t−C0\text{NPV} = \sum \frac{C_t}{(1 + r)^t} - C_0NPV=∑(1+r)tCt−C0

Where:

 CtC_tCt = Cash inflow at time ttt
 rrr = Discount rate (12% or 0.12)
 C0C_0C0 = Initial investment
 ttt = Time period

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