MAC2602 Assignment 1 2026 - Distinction | Due 7 September 2026

MAC2602 Assignment 1 2026 Assessment 01/S2/2026 QUESTION 1 (100 Marks; 120 Minutes) PART A (44 marks; 53 minutes) Premier Group Ltd (“PG”) is one of South Africa’s largest and oldest fast-moving consumer goods (FMCG) manufacturers and a prominent JSE-Listed corporation. Founded in 1824 and headquartered in Midrand, Gauteng Province, the company operates 47 grain mills, bakeries, and food production plants, alongside 28 distribution depots. Through this network, PG supplies products on credit to more than 60 000 formal and informal retailers. Some of the company’s grain mills and food production plants faced challenges with their environmental footprint. PG employs more than 15 000 people across South Africa, Mozambique, Eswatini, and Lesotho, where its operations are located. Over the last few years, labour unions have been raising concerns at some of PG’s South African operations regarding the hiring of illegal immigrants by some of its contractors. In response to these concerns, PG decided to prioritise hiring locals to do its in-service training at its operations. During the 2026 financial year, the company acquired the Fruit Products Western Cape canning facility in Tulbagh, Western Cape Province, with the intention to cement its position as a leading consumer packaging company in South Africa. However, questions have since been raised if PG potentially overpaid for the facility. The following information was utilised as part of the evaluation of the acquisition: 1. All the cash flows (including all the relevant taxes) occur at the end of the related financial year, except for the initial capital outlay, which occurs at the beginning of the year. 2. The municipal property taxes and rates are R100 000 per month. They are expected to increase by 6% per annum in year two and 8% per annum in year three. 3. PG conducted an environmental assessment study before finalising the acquisition of the facility, at a total cost of R400 000. If relevant, these costs are not capitalised. 4. The company paid an external law firm R to perform a due diligence review as part of its investment decision-making process. If relevant, these costs are not capitalised. 5. The facility was purchased at a total cost of R2 billion, of which R1 billion relates to the fruitcanning-process machines. The full purchase price was financed solely by a long-term loan at an annual interest rate of 11%. The capital amount is repayable annually in arrears (together with the related interest expense) over five years. 6. A specialist was brought in to assist with the valuation of the machines at a cost of R500 000. If Assessment 01/S2/2026 PART A (continued) 10. The current company taxation rate is 27%. It is expected to remain the same for the next three years under consideration. 11. The minimum required after-tax return of capital projects of this nature is 10%. REQUIRED: PART A Ignore the information in Parts B, C and D. (A1) Identify and briefly discuss eight economic, social, environmental, and governance factors that can affect the operations of PG, which are evident from the information given in the scenario. (16) (A2) From a quantitative perspective only, comment whether PGZ should have invested in the new facility. • You must present your NPV answer in a table format, with years shown across the columns, as illustrated below: Details (28) Year x Year x Year x R’million R’million R’million Truck cost 0 0 0 No marks will be awarded for this question if your NPV answer is not presented in this table format. • You must show your taxation calculation in a separate table to earn the relevant marks. • Present all NPV calculations in R millions. • Detailed Net Present Value calculation (27 marks); and • Recommendation/conclusion (1 mark). Total Part A [44]