FIN3701/101/2/2025
ASSESSMENT 1
Financial Management
FIN3701
Semester 1
Department of Finance, Risk Management and
Banking
Open Rubric
, ASSESSMENT
KINDLY NOTE THAT THERE ARE TWO COMPULSORY ASSIGNMENTS FOR THE
SECOND SEMESTER.
Assignment
Semester 1
number
01 Due date: 31 March 2025
Unique number: 340717
Assignment 01 – Semester 1 Due date: 31 March 2025 Unique number: 340717
The purpose of this assignment is to evaluate your knowledge of the fundamental
aspects of decision making for long-term investment. Study Chapters 9, 10, 11 and 12 of
the prescribed book and the relevant learning units to complete this assessment.
QUESTION 1 [8 marks]
Mphoreng Industries is considering replacing its existing machine, which was purchased 3 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
R5000 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.
BV = Cost – Accumulated depreciation
= 1 000 000 – (0.3 x 1000 000 x3)
= R 1000 000 – R900 000
= R100 000
1.2 Calculate the tax implication from the sale of the existing machine.
Tax = (Proceeds – BV) x 40%
= R (900 000 – 100 000) x 40% = 320 000
1.3 Calculate the after-tax proceeds from the sale of the existing machine.
2
ASSESSMENT 1
Financial Management
FIN3701
Semester 1
Department of Finance, Risk Management and
Banking
Open Rubric
, ASSESSMENT
KINDLY NOTE THAT THERE ARE TWO COMPULSORY ASSIGNMENTS FOR THE
SECOND SEMESTER.
Assignment
Semester 1
number
01 Due date: 31 March 2025
Unique number: 340717
Assignment 01 – Semester 1 Due date: 31 March 2025 Unique number: 340717
The purpose of this assignment is to evaluate your knowledge of the fundamental
aspects of decision making for long-term investment. Study Chapters 9, 10, 11 and 12 of
the prescribed book and the relevant learning units to complete this assessment.
QUESTION 1 [8 marks]
Mphoreng Industries is considering replacing its existing machine, which was purchased 3 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
R5000 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.
BV = Cost – Accumulated depreciation
= 1 000 000 – (0.3 x 1000 000 x3)
= R 1000 000 – R900 000
= R100 000
1.2 Calculate the tax implication from the sale of the existing machine.
Tax = (Proceeds – BV) x 40%
= R (900 000 – 100 000) x 40% = 320 000
1.3 Calculate the after-tax proceeds from the sale of the existing machine.
2
