EXCELCENTRE LEARNING INSTITUTE 0846244729
PU E
SHI
NG Y L E NC
OU TO THE GATE OF EXC EL
Education is the most powerful weapon which you can use to change the world
,EXCELCENTRE LEARNING INSTITUTE 0846244729
WARNING: PLEASE NOTE THAT PLAGIARISM IS A SERIOUS ACADEMIC
OFFENSE, therefore students must use this document ONLY as a guideline. Hence
students have regenerated their own (personalized) solutions paying particular
attention to module contents as prescribed by module facilitators, lecturers and
supervisors. This document’s purpose is to compact all sources of information that
might be relevant to students’ assignments, hence additional knowledge on the
provided information is not restricted by the authors. However, submitting this
document as one’s final work is considered unethical, and students should be
penalized. If this document is plagiarized by the users and fails, EXCELCENTRE
should not be rendered accountable since the contents in this document only give
learners a kick-start on what is expected of them from their areas of
specialty.CAUTION: STUDENTS ARE NOT MANDATED TO USE EVERY DETAIL IN
THIS DOCUMENT IN WRITING THEIR ASSIGNMENT
Education is the most powerful weapon which you can use to change the world
, EXCELCENTRE LEARNING INSTITUTE 0846244729
QUESTION 1
Table Format
Year Cash Flow (R) Discount Factor @16% Present Value (R)
0 -805 000 000 1.0000 -805 000 000
1 415 809 000 0.8621 358 467 738.90
2 424 308 870 0.7432 315 346 351.78
3 436 323 986.10 0.6407 279 552 177.79
4 451 144 743.183 0.5523 249 167 201.16
5 617 744 013.725 0.4761 294 107 624.93
NPV 691 641 094.56
Rounded to nearest rand: NPV = R691,641,095
Advice: Since the NPV is positive, GlucoCare Limited should purchase the new
machinery.
Question b) Quantitative Factors
Beyond the net present value (NPV) calculation, the board should conduct a sensitivity
analysis to assess how changes in key variables such as sales volume, production
costs, or inflation rates might impact project returns. It is also important to evaluate the
payback period to understand the project’s liquidity risk and ensure the internal rate of
return (IRR) exceeds the company’s cost of capital. Additionally, the board must
consider potential financing costs and tax implications, including the sustainability of
capital allowances and possible shifts in corporate tax policy.
Education is the most powerful weapon which you can use to change the world
PU E
SHI
NG Y L E NC
OU TO THE GATE OF EXC EL
Education is the most powerful weapon which you can use to change the world
,EXCELCENTRE LEARNING INSTITUTE 0846244729
WARNING: PLEASE NOTE THAT PLAGIARISM IS A SERIOUS ACADEMIC
OFFENSE, therefore students must use this document ONLY as a guideline. Hence
students have regenerated their own (personalized) solutions paying particular
attention to module contents as prescribed by module facilitators, lecturers and
supervisors. This document’s purpose is to compact all sources of information that
might be relevant to students’ assignments, hence additional knowledge on the
provided information is not restricted by the authors. However, submitting this
document as one’s final work is considered unethical, and students should be
penalized. If this document is plagiarized by the users and fails, EXCELCENTRE
should not be rendered accountable since the contents in this document only give
learners a kick-start on what is expected of them from their areas of
specialty.CAUTION: STUDENTS ARE NOT MANDATED TO USE EVERY DETAIL IN
THIS DOCUMENT IN WRITING THEIR ASSIGNMENT
Education is the most powerful weapon which you can use to change the world
, EXCELCENTRE LEARNING INSTITUTE 0846244729
QUESTION 1
Table Format
Year Cash Flow (R) Discount Factor @16% Present Value (R)
0 -805 000 000 1.0000 -805 000 000
1 415 809 000 0.8621 358 467 738.90
2 424 308 870 0.7432 315 346 351.78
3 436 323 986.10 0.6407 279 552 177.79
4 451 144 743.183 0.5523 249 167 201.16
5 617 744 013.725 0.4761 294 107 624.93
NPV 691 641 094.56
Rounded to nearest rand: NPV = R691,641,095
Advice: Since the NPV is positive, GlucoCare Limited should purchase the new
machinery.
Question b) Quantitative Factors
Beyond the net present value (NPV) calculation, the board should conduct a sensitivity
analysis to assess how changes in key variables such as sales volume, production
costs, or inflation rates might impact project returns. It is also important to evaluate the
payback period to understand the project’s liquidity risk and ensure the internal rate of
return (IRR) exceeds the company’s cost of capital. Additionally, the board must
consider potential financing costs and tax implications, including the sustainability of
capital allowances and possible shifts in corporate tax policy.
Education is the most powerful weapon which you can use to change the world
