FIN3701 Assignment
1 (COMPLETE
ANSWERS) Semester
2 2024 (232195) - DUE
20 August 2024
,FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2
2024 (232195) - DUE 20 August 2024
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-
For assistance with assignments whatsapp +254702715801
, 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 complete this question, we need to perform financial calculations to
determine the Net Present Value (NPV) and Annualized Net Present
Value (ANPV) of each machine, and then decide which machine
Batlokwa Industries should invest in.
1.1 Calculate the NPV for each of the three projects
The formula for NPV is:
NPV=∑(Rt(1+r)t)−I0\text{NPV} = \sum \left( \frac{R_t}{(1 + r)^t} \right) -
I_0NPV=∑((1+r)tRt)−I0
Where:
• RtR_tRt = Net cash inflow during the period ttt
• rrr = Discount rate (cost of capital)
• ttt = Number of time periods
• I0I_0I0 = Initial investment
Given the cost of capital r=12%r = 12\%r=12%, we can calculate the
NPV for each machine as follows:
Machine A
For assistance with assignments whatsapp +254702715801
1 (COMPLETE
ANSWERS) Semester
2 2024 (232195) - DUE
20 August 2024
,FIN3701 Assignment 1 (COMPLETE ANSWERS) Semester 2
2024 (232195) - DUE 20 August 2024
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-
For assistance with assignments whatsapp +254702715801
, 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 complete this question, we need to perform financial calculations to
determine the Net Present Value (NPV) and Annualized Net Present
Value (ANPV) of each machine, and then decide which machine
Batlokwa Industries should invest in.
1.1 Calculate the NPV for each of the three projects
The formula for NPV is:
NPV=∑(Rt(1+r)t)−I0\text{NPV} = \sum \left( \frac{R_t}{(1 + r)^t} \right) -
I_0NPV=∑((1+r)tRt)−I0
Where:
• RtR_tRt = Net cash inflow during the period ttt
• rrr = Discount rate (cost of capital)
• ttt = Number of time periods
• I0I_0I0 = Initial investment
Given the cost of capital r=12%r = 12\%r=12%, we can calculate the
NPV for each machine as follows:
Machine A
For assistance with assignments whatsapp +254702715801
