THE BMZ ACADEMY
THE BMZ ACADEMY
@0 6 8 0 5 3 8 2 1 3
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
MANCOSA: MBA FINANCIAL MANAGEMENT REVISION STUDY PACK
A class-based discussion with model answers to PAST EXAMINATIONS AND
Assignment
Model Solutions provided in this document are not intended for cheating, rather
to provide a starting point.
All solutions were presented based on class discussion.
Further breakdown are given for each question to give students a
comprehensive starting point and keep on referencing to the relevant areas.
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
APPENDIX A: ASSESSMENT COVER SHEET
ASSESSMENT COVER SHEET
Surname
First Name/s
Student Number
Subject Accounting and Financial Management
Assessment Number EXAMINATION PACK 2025
Tutor’s Name
Date Submitted
Submission () First Submission Resubmission
Postal Address
E-Mail
0680538213
Contact Numbers
0680538213
0680538213
Course/Intake Bachelor of Business Administration Honours
Declaration: I hereby declare that the assignment submitted is an original piece of work produced by myself.
Signature: Date:
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
QUESTION 1
1.1 Determine the after-tax cash flows and the net present value of the cash 1.1 1.2 outflows
under each alternative. (23 marks)
This analysis compares the Lease and Purchase alternatives using the Net Present Value (NPV)
method, which identifies the option with the lowest present value of cash outflows. The
discount rate is the 7% after-tax cost of debt, and the corporate tax rate is 30%.
Alternative 1: Lease
Annual lease payments of R96,700 are made for five years. These payments are tax-deductible,
producing a lease tax shield of (Lease payment × 30%). In Year 5, an additional purchase
option of R33,400 is payable.
After-tax cash flow schedule: Lease
Year Lease Tax Purchase Net Cash Discount Present
Payment Shield Option Flow Factor (7%) Value
(30%)
1 (96,700) 29,010 0 (67,690) 0.9346 (63,263)
2 (96,700) 29,010 0 (67,690) 0.8734 (59,120)
3 (96,700) 29,010 0 (67,690) 0.8163 (55,255)
4 (96,700) 29,010 0 (67,690) 0.7629 (51,641)
5 (96,700) 29,010 (33,400) (101,090) 0.7130 (72,077)
NPV of (R301,356)
Outflows
Result:
The Lease alternative has an NPV of (R301,356).
Alternative 2: Purchase
The purchase option involves:
i) Loan payments of R119,326 per year
BMZ ACADEMY 068 053 8213
THE BMZ ACADEMY
@0 6 8 0 5 3 8 2 1 3
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
MANCOSA: MBA FINANCIAL MANAGEMENT REVISION STUDY PACK
A class-based discussion with model answers to PAST EXAMINATIONS AND
Assignment
Model Solutions provided in this document are not intended for cheating, rather
to provide a starting point.
All solutions were presented based on class discussion.
Further breakdown are given for each question to give students a
comprehensive starting point and keep on referencing to the relevant areas.
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
APPENDIX A: ASSESSMENT COVER SHEET
ASSESSMENT COVER SHEET
Surname
First Name/s
Student Number
Subject Accounting and Financial Management
Assessment Number EXAMINATION PACK 2025
Tutor’s Name
Date Submitted
Submission () First Submission Resubmission
Postal Address
0680538213
Contact Numbers
0680538213
0680538213
Course/Intake Bachelor of Business Administration Honours
Declaration: I hereby declare that the assignment submitted is an original piece of work produced by myself.
Signature: Date:
BMZ ACADEMY 068 053 8213
, THE BMZ ACADEMY
QUESTION 1
1.1 Determine the after-tax cash flows and the net present value of the cash 1.1 1.2 outflows
under each alternative. (23 marks)
This analysis compares the Lease and Purchase alternatives using the Net Present Value (NPV)
method, which identifies the option with the lowest present value of cash outflows. The
discount rate is the 7% after-tax cost of debt, and the corporate tax rate is 30%.
Alternative 1: Lease
Annual lease payments of R96,700 are made for five years. These payments are tax-deductible,
producing a lease tax shield of (Lease payment × 30%). In Year 5, an additional purchase
option of R33,400 is payable.
After-tax cash flow schedule: Lease
Year Lease Tax Purchase Net Cash Discount Present
Payment Shield Option Flow Factor (7%) Value
(30%)
1 (96,700) 29,010 0 (67,690) 0.9346 (63,263)
2 (96,700) 29,010 0 (67,690) 0.8734 (59,120)
3 (96,700) 29,010 0 (67,690) 0.8163 (55,255)
4 (96,700) 29,010 0 (67,690) 0.7629 (51,641)
5 (96,700) 29,010 (33,400) (101,090) 0.7130 (72,077)
NPV of (R301,356)
Outflows
Result:
The Lease alternative has an NPV of (R301,356).
Alternative 2: Purchase
The purchase option involves:
i) Loan payments of R119,326 per year
BMZ ACADEMY 068 053 8213
