FIN3701 Assignment 1 Semester 1 Memo | Due 30 March 2026

+ +




+



ASSIGNMENT 1 SEMESTER 1
r r r r
t t t
DUE: 30 MlREH 2026
DISCLAIMER:
THI' DOCUMEN IS FDR REFERENCE AND GUIDf'N E PURP SES
ONLY. I DD NOT TAKE RESPDNSIBIUITY !FDR AN~ PLAG ARl~M. ~MISUSE. DR
ACADEMIC MIS DNDUCT RESULTING FROM THSIR USE. IT IS YDURi j ~

===
RESPONSIBILITY TO ENSU~E ORIGINALITY AN~ CDMPL!IAN E WITH
- RELEVANT GUlr LINES DR t TAND, RDl . r l r
1

, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT

 QUESTION 1

1.1. Calculate the initial investment required for the purchase of the new machine and the two
moulds.

The initial investment includes the costs of purchasing the new machine and the two moulds, as well
as the plastic material needed for production. The breakdown is as follows:

 Cost of machine: R120,000
 Cost of moulds: R22,000
 Plastic material: R1,200 (total, with R1,000 financed via overdraft)

The initial investment is the sum of these costs:

Initial investment=Cost of machine+Cost of moulds+Plastic material

Initial investment=R120,000+R22,000+R1,200=R143,200

Therefore, the initial investment required is R143,200.

1.2. Calculate the operating cash inflows generated by the new machine and the two moulds for
year 1 and year 2.

To calculate the operating cash inflows for Year 1 and Year 2, consider the revenue, variable costs,
fixed costs, and depreciation. Operating cash inflows are computed as:

Operating Cash Flow=Sales−Variable Costs−Fixed Costs+Depreciation

Year 1:
 Sales: R80,000
 Variable Costs: 15% of Sales = 0.15 × R80,000 = R12,000
 Fixed Costs: R4,500
 Depreciation: The machine cost is R120,000, depreciated over 2 years using straight-line
depreciation, so annual depreciation is:


. .
Deprec1at1on =
m20,ooo = RGO, 000 2
Calculate the operating cash flow for Year 1:

Operating Cash Flow (Year 1)=R80,000−R12,000−R4,500+R60,000=R123,500