FIN3701 ASSIGNMENT 1
(CORRECT ANSWERS )
SEMESTER 1 DUE DATE
st
31 MARCH 2025 .
QUESTION 1 [12 marks]
Mphoreng Industries is considering replacing its existing machine, which was purchased three
years ago at a cost of R1 million. The machine is depreciated at 30% per annum and can be sold
today at R900 000. The new machine will cost R700 000 with R20 000 installation cost and R5
000 transportation costs. The use of the new machine will decrease the working capital with R8
000. Assume a 40% capital gains tax per annum. REQUIRED:
1.1 Calculate the book value of the existing machine. Show all calculations.
The book value of the existing machine can be calculated using the formula:
Book Value = Initial Cost - Accumulated Depreciation
Given: Initial Cost = R1,000,000 Depreciation Rate = 30%
We can calculate the accumulated depreciation as follows:
(CORRECT ANSWERS )
SEMESTER 1 DUE DATE
st
31 MARCH 2025 .
QUESTION 1 [12 marks]
Mphoreng Industries is considering replacing its existing machine, which was purchased three
years ago at a cost of R1 million. The machine is depreciated at 30% per annum and can be sold
today at R900 000. The new machine will cost R700 000 with R20 000 installation cost and R5
000 transportation costs. The use of the new machine will decrease the working capital with R8
000. Assume a 40% capital gains tax per annum. REQUIRED:
1.1 Calculate the book value of the existing machine. Show all calculations.
The book value of the existing machine can be calculated using the formula:
Book Value = Initial Cost - Accumulated Depreciation
Given: Initial Cost = R1,000,000 Depreciation Rate = 30%
We can calculate the accumulated depreciation as follows:
