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FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
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FIN3701
CONFIDENTIAL
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UNIVERSITY EXAMINATIONS
OCTOBER/NOVEMBER 2024
EXAMINATION
FIN3701
Financial Management
70 Marks
Duration: 2 Hours
First Examiner: Dr LP Mamaro
External Examiner: Prof J Hall
Instructions:
This examination is timed. Therefore, you need to
complete and submit the examination within the allocated
time. The allocated time has been extended to allow for
this.
As the examination is an assessment, it should still be your
own work and you should remember to sign the Honesty
Declaration.
Plagiarism checks may be run on your submission.
Print out the paper, write your answers on it, and scan
and submit your completed paper. If the space that is
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, lOMoAR cPSD| 32110785
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FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
provided is not adequate, you may use your own paper
but make sure that you upload the pages in the correct
sequence.
You will submit the examination in the same way you
submitted your assignments on myUnisa.
This paper consists of 45 pages, including an invigilator
code on page 3, four pages for rough work (pp 37 to 40),
plus Appendix A (financial tables) on pages 41 to 44,
while page 45 contains the declaration of honesty form.
The examination consists of five questions, which must all
be answered. Show all your calculations clearly.
Please note that rough work will not be marked.
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FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
QUESTION 1 [10 marks]
Lemao Ltd, a large manufacturer of aircraft components, has a capital
budget of R2 000 000 and is evaluating the replacement of its existing
machine with the more sophisticated model. The CFO determined the
initial investment required and the terminal cash flow associated with
the replacement to be R1 666 000 and R254 000 respectively. Both the
usable life of the proposed and the remaining life of the current
machine are 5 years.
Expected cash inflows relating to the investments are as follows:
Year Proposed Current
machine machine
1 986 000 895 000
2 986 000 881 000
3 986 000 819 000
4 986 000 805 000
5 986 000 791 000
Lemao Ltd’s WACC is 15% and it is taxed at 28%.
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FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
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, lOMoAR cPSD| 32110785
Page 3 of 38
FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
UNIVERSITY EXAMINATIONS
OCTOBER/NOVEMBER 2024
EXAMINATION
FIN3701
Financial Management
70 Marks
Duration: 2 Hours
First Examiner: Dr LP Mamaro
External Examiner: Prof J Hall
Instructions:
This examination is timed. Therefore, you need to
complete and submit the examination within the allocated
time. The allocated time has been extended to allow for
this.
As the examination is an assessment, it should still be your
own work and you should remember to sign the Honesty
Declaration.
Plagiarism checks may be run on your submission.
Print out the paper, write your answers on it, and scan
and submit your completed paper. If the space that is
Downloaded by Vincent Cosmas ()
, lOMoAR cPSD| 32110785
Page 4 of 38
FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
provided is not adequate, you may use your own paper
but make sure that you upload the pages in the correct
sequence.
You will submit the examination in the same way you
submitted your assignments on myUnisa.
This paper consists of 45 pages, including an invigilator
code on page 3, four pages for rough work (pp 37 to 40),
plus Appendix A (financial tables) on pages 41 to 44,
while page 45 contains the declaration of honesty form.
The examination consists of five questions, which must all
be answered. Show all your calculations clearly.
Please note that rough work will not be marked.
Downloaded by Vincent Cosmas ()
, lOMoAR cPSD| 32110785
Page 5 of 38
FIN3701
CONFIDENTIAL
OCTOBER/NOVEMBER 2024
QUESTION 1 [10 marks]
Lemao Ltd, a large manufacturer of aircraft components, has a capital
budget of R2 000 000 and is evaluating the replacement of its existing
machine with the more sophisticated model. The CFO determined the
initial investment required and the terminal cash flow associated with
the replacement to be R1 666 000 and R254 000 respectively. Both the
usable life of the proposed and the remaining life of the current
machine are 5 years.
Expected cash inflows relating to the investments are as follows:
Year Proposed Current
machine machine
1 986 000 895 000
2 986 000 881 000
3 986 000 819 000
4 986 000 805 000
5 986 000 791 000
Lemao Ltd’s WACC is 15% and it is taxed at 28%.
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