FIN4801 ASSIGNMENT 04 2023
SUGGESTED SOLUTIONS
QUESTION 1
Mills Ltd., a manufacturer of various flour products wants to estimate its funding requirements
for the coming financial year. In the current financial year, the company achieved sales of
R100 million on assets worth R1000 million and liabilities of R500m. It’s resulting net profit
margin was 10% with no dividend being paid as the company is in a high growth phase. All
assets and liabilities are considered spontaneous and increase in line with sales. It is expected
that sales will grow by 20% in the coming year. Assets are however only utilized up to 80% of
total capacity and the spare capacity can be used first before new capacity is installed.
Required: Determine the Rand value of the spare asset capacity.
20% unused capacity = 0.2 *R1000 = R200 million
SUGGESTED SOLUTIONS
QUESTION 1
Mills Ltd., a manufacturer of various flour products wants to estimate its funding requirements
for the coming financial year. In the current financial year, the company achieved sales of
R100 million on assets worth R1000 million and liabilities of R500m. It’s resulting net profit
margin was 10% with no dividend being paid as the company is in a high growth phase. All
assets and liabilities are considered spontaneous and increase in line with sales. It is expected
that sales will grow by 20% in the coming year. Assets are however only utilized up to 80% of
total capacity and the spare capacity can be used first before new capacity is installed.
Required: Determine the Rand value of the spare asset capacity.
20% unused capacity = 0.2 *R1000 = R200 million
