QUESTION BANK 01/2017
QUESTIONS
APPLICATION OF FINANCIAL
MANAGEMENT TECHNIQUES
MAC3702
Semester 2
Department of Management Accounting
IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail addresses and make sure that you
have regular access to the myUnisa module website, MAC3702-2017-S2, as well as your
group website.
Note: This is an online module and therefore it is available on myUnisa. However, in order to
support you in your learning process, you will also receive some study material in printed
format.
,Table of Contents
Question 01: SANRAL ........................................................................................................ 3
Question 02: FAST AND FURIOUS .................................................................................... 5
Question 03: DRESSED FOR SUCCESS ........................................................................... 6
Question 04: KGORONG .................................................................................................... 9
Question 05: FAST AND QUICK ....................................................................................... 10
Question 06: HOTELS 365 ............................................................................................... 11
Question 07: SAM TOURS ............................................................................................... 14
Question 08: MASHESHA ................................................................................................ 15
Question 09: FRISCOR .................................................................................................... 17
Question 10: JAZZ STUDIOS ........................................................................................... 19
Question 11: PICTURE PERFECT ................................................................................... 20
Question 12: BEAUTIFUL FACES AND INNER BEAUTY ................................................. 21
Question 13: TITUS AND CASSAL ................................................................................... 22
Question 14: TOY STARS ................................................................................................ 23
Question 15: CITY OF NKANDLA ..................................................................................... 25
Question 16: CURROW COLLEGE .................................................................................. 27
Question 17: AFRICA BAG ............................................................................................... 31
Question 18: SPLITZ STORES ......................................................................................... 32
Question 19: SIMON & SON ............................................................................................. 33
Question 20: umfula.co.za ................................................................................................ 36
Question 21: PURIFIED H2O ........................................................................................... 40
Question 22: S & S ........................................................................................................... 42
Question 23: SPHA ........................................................................................................... 43
Question 24: A GREYS .................................................................................................... 47
Question 25: LANGA HOTELS ......................................................................................... 49
Question 26: PBC ............................................................................................................. 52
Question 27: BOXER CASH & CARRY ............................................................................ 57
Question 28: QUEEN POWER ......................................................................................... 60
Question 29: BIDDER ....................................................................................................... 63
Question 30: ZENZEL ....................................................................................................... 65
Question 31: TTK ............................................................................................................. 66
Question 32: LCHF ............................................................................................................ 68
Question 33: TRUCK & TRAILER ..................................................................................... 70
Question 34: SIMUNYE GOLD .......................................................................................... 72
Question 35: FAZEBOOK .................................................................................................. 75
Question 36: THE BOLT & NUT ENGINEERING .............................................................. 78
Question 37: LION BRANDS ............................................................................................ 81
Question 38: CHAPTERS & NOVEL ................................................................................. 85
Question 39: NEW MUTUAL ............................................................................................ 88
Question 40: KINGSTON .................................................................................................. 91
2
,QUESTION 01: SANRAL (20 MARKS) CAPITAL BUDGETING
After the successful hosting of the 2010 FIFA World Cup® and successful launching of the e-
toll system in Gauteng, the Western Cape Provincial Government (WCG) is following suit. The
City of Cape Town has won a bid to host Olympics 2024 and the WCG has started reviewing
its infrastructure with the view of making necessary upgrades.
South African National Roads Agency Limited (SANRAL) is responsible for the road
infrastructure throughout the country and has been given a mandate to improve major road
networks in the Western Cape in preparation for the Olympics games in 2024. The Department
of Transport and Public Works has made it clear that it would not allocate any funds to the
upgrade.
SANRAL is considering two alternatives for recovering the capital outlay on the road
infrastructure over the next five years. SANRAL can either use the e-toll system or the fuel
levy system.
Alternative 1: e-toll system
How it works: Gantries are constructed at different points on major roads around the Western
Cape. As a motor vehicle passes through a gantry, the car registration details are read
electronically and the information is passed directly to the control centre in Paarl where the
amount owed (toll fee) for passing that gantry is established. This is immediately sent to the
motor vehicle owner’s bank, instructing the bank to debit the owner’s account with the toll fee.
All Western Cape car owners are required to register with SANRAL. Visitors to the Western
Cape Province also need to register at any of the leading retailers in the province. A customer
centre will be established to attend to general road user queries, unpaid toll fees, unregistered
motor vehicles.
Alternative 2: Fuel levy system
How it works: No e-toll infrastructure will be put in place but a special levy will be charged to
the fuel price, meaning that the retail price of fuel (across all grades) will be increased at all
fuel stations across the country. This levy is then electronically transferred to SANRAL’s
account as fuel is purchased. Only the levy collected in the Western Cape will be used for the
Western Cape infrastructure development.
SANRAL has estimated capital expenditure (CAPEX) at the start of the project, where
applicable to be as follows:
CAPEX R
Roads 17 884 002
Gantries (civil works) 393 867
e-toll IT systems 1 837 480
Control centre – Paarl 229 756
Customer centre 217 217
IT Systems - fuel levy 5 545 682
3
, Running of the e-toll system
SANRAL expects 2 300 000 cars to go through the gantries per annum at an average toll fee
of R3,60 (which will not change) per car. About 30% of the cars passing the gantries will not
register for e-toll, making it impossible to recover amount owed by the unregistered users. The
toll revenue is expected to grow in line with inflation and increase in number of cars annually.
Electronic Tolling Collection Company has provisionally been awarded R6 500 000 tender to
manage the collection of toll fees and this is paid annually in arrears in equal instalments over
the next five years. Working capital of R1 677 123 is required at the start of the project.
Running of the fuel levy system
SANRAL will charge a fixed fuel levy of 55c per litre for the next five years. South African road
users currently consume 35 000 000 litres of fuel per annum, of which the Western Cape will
consume 30% (this ratio will apply for the duration of the project). Annual consumption of fuel
will increase in line with increase in number of road users.
SANRAL has estimated the initial working capital of R234 187. Operating costs are budgeted
at R650 000 per annum.
Additional information:
National Association of Automobile Manufacturers of South Africa (NAAMSA) expects the
Western Cape road users to increase at a steady annual rate of 6% for the duration of the
project. SANRAL is exempt from Income Tax in terms of s 10(1)(t)(iii) of the Income Tax Act.
The WACC is calculated using the RSA government bond rate of 7% before tax
REQUIRED
a) Using NPV calculation, determine which system SANRAL should use to recover the
capital outlay.
[20]
4
QUESTIONS
APPLICATION OF FINANCIAL
MANAGEMENT TECHNIQUES
MAC3702
Semester 2
Department of Management Accounting
IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail addresses and make sure that you
have regular access to the myUnisa module website, MAC3702-2017-S2, as well as your
group website.
Note: This is an online module and therefore it is available on myUnisa. However, in order to
support you in your learning process, you will also receive some study material in printed
format.
,Table of Contents
Question 01: SANRAL ........................................................................................................ 3
Question 02: FAST AND FURIOUS .................................................................................... 5
Question 03: DRESSED FOR SUCCESS ........................................................................... 6
Question 04: KGORONG .................................................................................................... 9
Question 05: FAST AND QUICK ....................................................................................... 10
Question 06: HOTELS 365 ............................................................................................... 11
Question 07: SAM TOURS ............................................................................................... 14
Question 08: MASHESHA ................................................................................................ 15
Question 09: FRISCOR .................................................................................................... 17
Question 10: JAZZ STUDIOS ........................................................................................... 19
Question 11: PICTURE PERFECT ................................................................................... 20
Question 12: BEAUTIFUL FACES AND INNER BEAUTY ................................................. 21
Question 13: TITUS AND CASSAL ................................................................................... 22
Question 14: TOY STARS ................................................................................................ 23
Question 15: CITY OF NKANDLA ..................................................................................... 25
Question 16: CURROW COLLEGE .................................................................................. 27
Question 17: AFRICA BAG ............................................................................................... 31
Question 18: SPLITZ STORES ......................................................................................... 32
Question 19: SIMON & SON ............................................................................................. 33
Question 20: umfula.co.za ................................................................................................ 36
Question 21: PURIFIED H2O ........................................................................................... 40
Question 22: S & S ........................................................................................................... 42
Question 23: SPHA ........................................................................................................... 43
Question 24: A GREYS .................................................................................................... 47
Question 25: LANGA HOTELS ......................................................................................... 49
Question 26: PBC ............................................................................................................. 52
Question 27: BOXER CASH & CARRY ............................................................................ 57
Question 28: QUEEN POWER ......................................................................................... 60
Question 29: BIDDER ....................................................................................................... 63
Question 30: ZENZEL ....................................................................................................... 65
Question 31: TTK ............................................................................................................. 66
Question 32: LCHF ............................................................................................................ 68
Question 33: TRUCK & TRAILER ..................................................................................... 70
Question 34: SIMUNYE GOLD .......................................................................................... 72
Question 35: FAZEBOOK .................................................................................................. 75
Question 36: THE BOLT & NUT ENGINEERING .............................................................. 78
Question 37: LION BRANDS ............................................................................................ 81
Question 38: CHAPTERS & NOVEL ................................................................................. 85
Question 39: NEW MUTUAL ............................................................................................ 88
Question 40: KINGSTON .................................................................................................. 91
2
,QUESTION 01: SANRAL (20 MARKS) CAPITAL BUDGETING
After the successful hosting of the 2010 FIFA World Cup® and successful launching of the e-
toll system in Gauteng, the Western Cape Provincial Government (WCG) is following suit. The
City of Cape Town has won a bid to host Olympics 2024 and the WCG has started reviewing
its infrastructure with the view of making necessary upgrades.
South African National Roads Agency Limited (SANRAL) is responsible for the road
infrastructure throughout the country and has been given a mandate to improve major road
networks in the Western Cape in preparation for the Olympics games in 2024. The Department
of Transport and Public Works has made it clear that it would not allocate any funds to the
upgrade.
SANRAL is considering two alternatives for recovering the capital outlay on the road
infrastructure over the next five years. SANRAL can either use the e-toll system or the fuel
levy system.
Alternative 1: e-toll system
How it works: Gantries are constructed at different points on major roads around the Western
Cape. As a motor vehicle passes through a gantry, the car registration details are read
electronically and the information is passed directly to the control centre in Paarl where the
amount owed (toll fee) for passing that gantry is established. This is immediately sent to the
motor vehicle owner’s bank, instructing the bank to debit the owner’s account with the toll fee.
All Western Cape car owners are required to register with SANRAL. Visitors to the Western
Cape Province also need to register at any of the leading retailers in the province. A customer
centre will be established to attend to general road user queries, unpaid toll fees, unregistered
motor vehicles.
Alternative 2: Fuel levy system
How it works: No e-toll infrastructure will be put in place but a special levy will be charged to
the fuel price, meaning that the retail price of fuel (across all grades) will be increased at all
fuel stations across the country. This levy is then electronically transferred to SANRAL’s
account as fuel is purchased. Only the levy collected in the Western Cape will be used for the
Western Cape infrastructure development.
SANRAL has estimated capital expenditure (CAPEX) at the start of the project, where
applicable to be as follows:
CAPEX R
Roads 17 884 002
Gantries (civil works) 393 867
e-toll IT systems 1 837 480
Control centre – Paarl 229 756
Customer centre 217 217
IT Systems - fuel levy 5 545 682
3
, Running of the e-toll system
SANRAL expects 2 300 000 cars to go through the gantries per annum at an average toll fee
of R3,60 (which will not change) per car. About 30% of the cars passing the gantries will not
register for e-toll, making it impossible to recover amount owed by the unregistered users. The
toll revenue is expected to grow in line with inflation and increase in number of cars annually.
Electronic Tolling Collection Company has provisionally been awarded R6 500 000 tender to
manage the collection of toll fees and this is paid annually in arrears in equal instalments over
the next five years. Working capital of R1 677 123 is required at the start of the project.
Running of the fuel levy system
SANRAL will charge a fixed fuel levy of 55c per litre for the next five years. South African road
users currently consume 35 000 000 litres of fuel per annum, of which the Western Cape will
consume 30% (this ratio will apply for the duration of the project). Annual consumption of fuel
will increase in line with increase in number of road users.
SANRAL has estimated the initial working capital of R234 187. Operating costs are budgeted
at R650 000 per annum.
Additional information:
National Association of Automobile Manufacturers of South Africa (NAAMSA) expects the
Western Cape road users to increase at a steady annual rate of 6% for the duration of the
project. SANRAL is exempt from Income Tax in terms of s 10(1)(t)(iii) of the Income Tax Act.
The WACC is calculated using the RSA government bond rate of 7% before tax
REQUIRED
a) Using NPV calculation, determine which system SANRAL should use to recover the
capital outlay.
[20]
4
