FIN3701 ASSESSMENT 1 SEMESTER 2 2026
DUE DATE: 27 AUGUST 2026
QUESTION 1
1.1 Calculate the initial investment required for the proposed dried-fruit project. (4
marks)
The initial investment is the net cash outlay at Year 0. Sunk costs (such as the R18,000
consultant’s fee already paid) are ignored because they are not incremental to the
decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial Investment R215,000
The R10,000 financed through the overdraft is still a cash outflow for the project and is
included in the NWC investment. The source of finance does not affect the project’s
cash flows
(Gitman, 2020:352; UNISA, 2026:4).
, 1.2 Calculate the operating cash flows for Year 1 and Year 2. (10 marks)
Depreciation (straight-line): R200,000 ÷ 2 years = R100,000 per year (Gitman,
2020:356).
Item Year 1 Year 2
Sales R190,000 R190,000 × 1.10 = R209,000
Variable costs (25% of sales) (R47,500) (R52,250)
Fixed operating costs (R24,000) (R24,000)
EBDIT R118,500 R132,750
Depreciation (R100,000) (R100,000)
EBIT R18,500 R32,750
Tax @ 29% (R5,365) (R9,497.50)
NOPAT R13,135 R23,252.50
Add back depreciation +R100,000 +R100,000
Operating Cash Flow R113,135 R123,252.50
OCF = EBIT(1 − T) + Depreciation (Gitman, 2020:356; UNISA, 2026:4).
DUE DATE: 27 AUGUST 2026
QUESTION 1
1.1 Calculate the initial investment required for the proposed dried-fruit project. (4
marks)
The initial investment is the net cash outlay at Year 0. Sunk costs (such as the R18,000
consultant’s fee already paid) are ignored because they are not incremental to the
decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial Investment R215,000
The R10,000 financed through the overdraft is still a cash outflow for the project and is
included in the NWC investment. The source of finance does not affect the project’s
cash flows
(Gitman, 2020:352; UNISA, 2026:4).
, 1.2 Calculate the operating cash flows for Year 1 and Year 2. (10 marks)
Depreciation (straight-line): R200,000 ÷ 2 years = R100,000 per year (Gitman,
2020:356).
Item Year 1 Year 2
Sales R190,000 R190,000 × 1.10 = R209,000
Variable costs (25% of sales) (R47,500) (R52,250)
Fixed operating costs (R24,000) (R24,000)
EBDIT R118,500 R132,750
Depreciation (R100,000) (R100,000)
EBIT R18,500 R32,750
Tax @ 29% (R5,365) (R9,497.50)
NOPAT R13,135 R23,252.50
Add back depreciation +R100,000 +R100,000
Operating Cash Flow R113,135 R123,252.50
OCF = EBIT(1 − T) + Depreciation (Gitman, 2020:356; UNISA, 2026:4).
