1. Forecast for 2024 to 2026 Bafifi’s forecast was prepared using the following
assumptions
• Sales prices are projected to increase by 12% in 2024 and thereafter by a constant
growth of 7%.
• Bafifi’s gross profit percentage is expected to decrease in 2024 due to the introduction
of a new product thereafter increase by 5% in 2025 and then return to the 2023 levels in
2026.
• Bafifi’s expects to increase its operating profit margin by limiting the increase in other
operating expenses, to only 5% per year from 2025.
• Assume that depreciation amount equals tax allowances.
• Bafifi took out a loan with Buzz bank of R100 million at the beginning of 2023 to
finance the development of the new spray product. The loan bears an interest rate of
10% with interest payable annually on the last day of the year. The loan capital amount
is repayable in 2025. The interest payments for 2023 included interest payments on
another loan with Buzz Bank, which was fully settled in 2023.
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