FIN4801 ASSIGNMENT 4 (COMPLETE ANSWERS) 2025 – DUE 8 August 2025 ;100% trusted ,comprehensive and complete reliable solution with clear explanation

,FIN4801 ASSIGNMENT 4 (COMPLETE ANSWERS) 2025 – DUE
8 August 2025 ;100% trusted ,comprehensive and complete
reliable solution with clear explanation




QUESTION 1: Mapex Ltd – Drone Project Evaluation


Part 1: Relevant Cash Flows (12 Marks)

Initial Investment (Year 0 – Nominal)

 𝑭𝒐𝒓𝒎𝒖𝒍𝒂:

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
= 𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑟𝑦 𝐶𝑜𝑠𝑡 + 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡\𝑡𝑒𝑥𝑡{𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡}
= \𝑡𝑒𝑥𝑡{𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑟𝑦 𝐶𝑜𝑠𝑡}
+ \𝑡𝑒𝑥𝑡{𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡}𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
= 𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑟𝑦 𝐶𝑜𝑠𝑡 + 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑅800,000 + 𝑅200,000
= 𝑅1,000,000 = 𝑅800,000 + 𝑅200,000 = 𝑅1,000,000
= 𝑅800,000 + 𝑅200,000 = 𝑅1,000,000

 Cash flow (Year 0) = – R1,000,000



Annual Operating Cash Flows (Years 1–4 – Real Terms)

 𝑮𝒊𝒗𝒆𝒏:
o 𝑅𝑒𝑎𝑙 𝑆𝑎𝑙𝑒𝑠 = 𝑅1,500,000
o 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠 = 60% 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠

, o 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 = 𝑅200,000
o 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝑅1,000,000 ÷ 4 = 𝑅250,000
o 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 = 27%
 𝑪𝒂𝒍𝒄𝒖𝒍𝒂𝒕𝒊𝒐𝒏𝒔:

𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠 = 60% × 𝑅1,500,000 = 𝑅900,000\𝑡𝑒𝑥𝑡{𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠}
= 60\% \𝑡𝑖𝑚𝑒𝑠 𝑅1,500,000 = 𝑅900,000𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠
= 60% × 𝑅1,500,000 = 𝑅900,000 𝐸𝐵𝐼𝑇
= 𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠 − 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 − 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛\𝑡𝑒𝑥𝑡{𝐸𝐵𝐼𝑇}
= \𝑡𝑒𝑥𝑡{𝑆𝑎𝑙𝑒𝑠} − \𝑡𝑒𝑥𝑡{𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠} − \𝑡𝑒𝑥𝑡{𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠}
− \𝑡𝑒𝑥𝑡{𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛}𝐸𝐵𝐼𝑇
= 𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠 − 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 − 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
= 𝑅1,500,000 − 𝑅900,000 − 𝑅200,000 − 𝑅250,000 = 𝑅150,000
= 𝑅1,500,000 − 𝑅900,000 − 𝑅200,000 − 𝑅250,000 = 𝑅150,000
= 𝑅1,500,000 − 𝑅900,000 − 𝑅200,000 − 𝑅250,000 = 𝑅150,000 𝑇𝑎𝑥
= 27% × 𝑅150,000 = 𝑅40,500\𝑡𝑒𝑥𝑡{𝑇𝑎𝑥} = 27\% \𝑡𝑖𝑚𝑒𝑠 𝑅150,000
= 𝑅40,500𝑇𝑎𝑥 = 27% × 𝑅150,000
= 𝑅40,500 𝑁𝑒𝑡 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 (𝑁𝑂𝑃𝐴𝑇)
= 𝑅150,000 − 𝑅40,500
= 𝑅109,500\𝑡𝑒𝑥𝑡{𝑁𝑒𝑡 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 (𝑁𝑂𝑃𝐴𝑇)}
= 𝑅150,000 − 𝑅40,500
= 𝑅109,500𝑁𝑒𝑡 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 (𝑁𝑂𝑃𝐴𝑇)
= 𝑅150,000 − 𝑅40,500 = 𝑅109,500 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
= 𝑁𝑂𝑃𝐴𝑇 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛\𝑡𝑒𝑥𝑡{𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤}
= \𝑡𝑒𝑥𝑡{𝑁𝑂𝑃𝐴𝑇} + \𝑡𝑒𝑥𝑡{𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛}𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
= 𝑁𝑂𝑃𝐴𝑇 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝑅109,500 + 𝑅250,000 = 𝑅359,500 (𝑝𝑒𝑟 𝑦𝑒𝑎𝑟)
= 𝑅109,500 + 𝑅250,000 = 𝑅359,500 \𝑡𝑒𝑥𝑡{ (𝑝𝑒𝑟 𝑦𝑒𝑎𝑟)}
= 𝑅109,500 + 𝑅250,000 = 𝑅359,500 (𝑝𝑒𝑟 𝑦𝑒𝑎𝑟)


Terminal Cash Flow (Year 4 – Adjusted to Real Terms)

 Given:
o Salvage value (nominal) = R1,200,000
o Inflation = 4%
o Time = 4 years
 Formula (Real Value of Salvage):