MAC3702 – Question (a)
All amounts in Rand (R). Rounded to nearest rand. Full detailed workings shown below.
Year 1 Detailed Calculations
Units = 7,200,000
Selling price = 22 × (1.05)^0 = 22.00
Revenue = Units × Price = 7,200,000 × 22.00 = 158,400,000
Variable cost = 55% × Revenue = 87,120,000
Fixed cost = 3 500 000 × (1.06)^0 = 3,500,000
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 50,780,000
Tax = 27% × EBIT = 13,710,600
Profit after tax = 37,069,400
Operating cash flow = PAT + Depreciation = 54,069,400
Year 2 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^1 = 23.10
Revenue = Units × Price = 9,000,000 × 23.10 = 207,900,000
Variable cost = 55% × Revenue = 114,345,000
Fixed cost = 3 500 000 × (1.06)^1 = 3,710,000
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 72,845,000
Tax = 27% × EBIT = 19,668,150
Profit after tax = 53,176,850
Operating cash flow = PAT + Depreciation = 70,176,850
, Less working capital increase = (2,000,000)
Year 3 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^2 = 24.26
Revenue = Units × Price = 9,000,000 × 24.26 = 218,295,000
Variable cost = 55% × Revenue = 120,062,250
Fixed cost = 3 500 000 × (1.06)^2 = 3,932,600
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 77,300,150
Tax = 27% × EBIT = 20,871,040
Profit after tax = 56,429,110
Operating cash flow = PAT + Depreciation = 73,429,110
Year 4 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^3 = 25.47
Revenue = Units × Price = 9,000,000 × 25.47 = 229,209,750
Variable cost = 55% × Revenue = 126,065,363
Fixed cost = 3 500 000 × (1.06)^3 = 4,168,556
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 81,975,832
Tax = 27% × EBIT = 22,133,475
Profit after tax = 59,842,357
Operating cash flow = PAT + Depreciation = 76,842,357
Year 5 Detailed Calculations
Units = 9,000,000
All amounts in Rand (R). Rounded to nearest rand. Full detailed workings shown below.
Year 1 Detailed Calculations
Units = 7,200,000
Selling price = 22 × (1.05)^0 = 22.00
Revenue = Units × Price = 7,200,000 × 22.00 = 158,400,000
Variable cost = 55% × Revenue = 87,120,000
Fixed cost = 3 500 000 × (1.06)^0 = 3,500,000
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 50,780,000
Tax = 27% × EBIT = 13,710,600
Profit after tax = 37,069,400
Operating cash flow = PAT + Depreciation = 54,069,400
Year 2 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^1 = 23.10
Revenue = Units × Price = 9,000,000 × 23.10 = 207,900,000
Variable cost = 55% × Revenue = 114,345,000
Fixed cost = 3 500 000 × (1.06)^1 = 3,710,000
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 72,845,000
Tax = 27% × EBIT = 19,668,150
Profit after tax = 53,176,850
Operating cash flow = PAT + Depreciation = 70,176,850
, Less working capital increase = (2,000,000)
Year 3 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^2 = 24.26
Revenue = Units × Price = 9,000,000 × 24.26 = 218,295,000
Variable cost = 55% × Revenue = 120,062,250
Fixed cost = 3 500 000 × (1.06)^2 = 3,932,600
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 77,300,150
Tax = 27% × EBIT = 20,871,040
Profit after tax = 56,429,110
Operating cash flow = PAT + Depreciation = 73,429,110
Year 4 Detailed Calculations
Units = 9,000,000
Selling price = 22 × (1.05)^3 = 25.47
Revenue = Units × Price = 9,000,000 × 25.47 = 229,209,750
Variable cost = 55% × Revenue = 126,065,363
Fixed cost = 3 500 000 × (1.06)^3 = 4,168,556
Depreciation = 17,000,000
EBIT = Revenue – Variable – Fixed – Depreciation = 81,975,832
Tax = 27% × EBIT = 22,133,475
Profit after tax = 59,842,357
Operating cash flow = PAT + Depreciation = 76,842,357
Year 5 Detailed Calculations
Units = 9,000,000
