ASSIGNMENT 01 –
FIN3701
QUESTION 1
1.1 Calculate the initial investment
required for the proposed dried-fruit
project.
, Item Amount (R)
Solar-powered fruit-drying system
170,000
(including delivery)
Special drying trays 10,000
Installation cost 20,000
Total installed cost 200,000
Net working capital investment 15,000
Initial investment R215,000
1.2 Calculate the operating cash flows
generated by the project for Year 1 and
Year 2.
Year 1:
Item Calculation Amount (R)
Sales Given 190,000
Variable costs (25% of sales) 190,000 × 25% -47,500
Fixed operating costs Given -24,000
EBIT 118,500
Tax (29%) 118,500 × 29% -34,365
NOPAT 84,135
Add: Depreciation 200,000 ÷ 2 years 100,000
Operating cash flow (Year 1) R184,135
Year 2:
Item Calculation Amount (R)
Sales (10% increase) 190,000 × 1.10 209,000
Variable costs (25% of sales) 209,000 × 25% -52,250
Fixed operating costs Given -24,000
EBIT 132,750
FIN3701
QUESTION 1
1.1 Calculate the initial investment
required for the proposed dried-fruit
project.
, Item Amount (R)
Solar-powered fruit-drying system
170,000
(including delivery)
Special drying trays 10,000
Installation cost 20,000
Total installed cost 200,000
Net working capital investment 15,000
Initial investment R215,000
1.2 Calculate the operating cash flows
generated by the project for Year 1 and
Year 2.
Year 1:
Item Calculation Amount (R)
Sales Given 190,000
Variable costs (25% of sales) 190,000 × 25% -47,500
Fixed operating costs Given -24,000
EBIT 118,500
Tax (29%) 118,500 × 29% -34,365
NOPAT 84,135
Add: Depreciation 200,000 ÷ 2 years 100,000
Operating cash flow (Year 1) R184,135
Year 2:
Item Calculation Amount (R)
Sales (10% increase) 190,000 × 1.10 209,000
Variable costs (25% of sales) 209,000 × 25% -52,250
Fixed operating costs Given -24,000
EBIT 132,750
