FIN4801
Assignment 4
Due 8 August 2025
, Assignment 4
Question 1 – Mapex Ltd. Drone Project
PART 1: Identify and adjust the relevant cash flows (12 marks)
Initial Investment (Year 0)
• Machinery cost: R800 000
• Installation cost: R200 000
• Total Initial Outlay:
=R800,000+R200,000=R1,000,000
This is a once-off cash outflow at time 0.
Annual Operating Cash Flows (Years 1–4)
Calculate real cash flows and then convert them to nominal because the salvage value
is in nominal terms, and inflation is given.
Sales Revenue (real):
=R1,500,000 per year
Variable Costs (real):
=60%×R1,500,000=R900,000
Fixed Costs (real):
=R200,000= R200,000=R200,000
Depreciation (straight-line):
=R1,000,000/4=R250,000 per year
Real EBIT Calculation:
EBIT=Sales−Variable Costs−Fixed Costs−Depreciation
=R1,500,000−R900,000−R200,000−R250,000=R150,000
Assignment 4
Due 8 August 2025
, Assignment 4
Question 1 – Mapex Ltd. Drone Project
PART 1: Identify and adjust the relevant cash flows (12 marks)
Initial Investment (Year 0)
• Machinery cost: R800 000
• Installation cost: R200 000
• Total Initial Outlay:
=R800,000+R200,000=R1,000,000
This is a once-off cash outflow at time 0.
Annual Operating Cash Flows (Years 1–4)
Calculate real cash flows and then convert them to nominal because the salvage value
is in nominal terms, and inflation is given.
Sales Revenue (real):
=R1,500,000 per year
Variable Costs (real):
=60%×R1,500,000=R900,000
Fixed Costs (real):
=R200,000= R200,000=R200,000
Depreciation (straight-line):
=R1,000,000/4=R250,000 per year
Real EBIT Calculation:
EBIT=Sales−Variable Costs−Fixed Costs−Depreciation
=R1,500,000−R900,000−R200,000−R250,000=R150,000
