Fin3701
Assignment 1 Semester 2 2026
Due Date: 28 aUGUST 2026
QUESTION 1
1.1 Initial investment required for the proposed dried-fruit project
The initial investment is the net cash outlay at Year 0. The R18,000 consultant's fee has
already been paid and is therefore a sunk cost, so it is excluded because it is not incremental
to the investment decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial investment R215,000
, QUESTION 1
1.1 Initial investment required for the proposed dried-fruit project
The initial investment is the net cash outlay at Year 0. The R18,000 consultant's fee
has already been paid and is therefore a sunk cost, so it is excluded because it is not
incremental to the investment decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial investment R215,000
The R10,000 financed through the overdraft remains part of the project's net working
capital requirement. The source of finance does not change the amount of the
project's initial cash flow (Gitman, 2020:352; UNISA, 2026:4).
1.2 Operating cash flows for Year 1 and Year 2
( )
Item Year 1 (R) Year 2 (R)
Sales 190,000 209,000
Variable costs (25% of sales) (47,500) (52,250)
Assignment 1 Semester 2 2026
Due Date: 28 aUGUST 2026
QUESTION 1
1.1 Initial investment required for the proposed dried-fruit project
The initial investment is the net cash outlay at Year 0. The R18,000 consultant's fee has
already been paid and is therefore a sunk cost, so it is excluded because it is not incremental
to the investment decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial investment R215,000
, QUESTION 1
1.1 Initial investment required for the proposed dried-fruit project
The initial investment is the net cash outlay at Year 0. The R18,000 consultant's fee
has already been paid and is therefore a sunk cost, so it is excluded because it is not
incremental to the investment decision (Gitman, 2020:350).
Item Amount (R)
Cost of solar-powered drying system 170,000
Special drying trays 10,000
Installation cost 20,000
Total installed cost (depreciable base) 200,000
Net working capital required 15,000
Initial investment R215,000
The R10,000 financed through the overdraft remains part of the project's net working
capital requirement. The source of finance does not change the amount of the
project's initial cash flow (Gitman, 2020:352; UNISA, 2026:4).
1.2 Operating cash flows for Year 1 and Year 2
( )
Item Year 1 (R) Year 2 (R)
Sales 190,000 209,000
Variable costs (25% of sales) (47,500) (52,250)
