MEMO – FIN3701 JUNE 2019
+27 81 565 7602
, QUESTION 1
1.1 Initial investment Initial
investment
Cost of new machine (R750 000)
Installation cost (R20 000)
*Proceeds from the old R70 000
machine
(R700 000)
Change in NWC R7 000
Initial investment (R693 000)
*Proceeds from the old machine
Depreciation R350 000 ÷ 5 = R70 000
Accumulated depreciation R70 000 × 4 = R280 000
Book value R350 000 – R280 000 = R70 000
Capital gain R70 000 – R70 000 = R0
Capital gains tax R0
Proceeds from sale R70 000 – R0 = R70 000
+27 81 565 7602
+27 81 565 7602
, QUESTION 1
1.1 Initial investment Initial
investment
Cost of new machine (R750 000)
Installation cost (R20 000)
*Proceeds from the old R70 000
machine
(R700 000)
Change in NWC R7 000
Initial investment (R693 000)
*Proceeds from the old machine
Depreciation R350 000 ÷ 5 = R70 000
Accumulated depreciation R70 000 × 4 = R280 000
Book value R350 000 – R280 000 = R70 000
Capital gain R70 000 – R70 000 = R0
Capital gains tax R0
Proceeds from sale R70 000 – R0 = R70 000
+27 81 565 7602
