FIN3701 ASSIGNMENT 1 SOLUTIONS FIRST SEMESTER 2022

2022




FINANCIAL MANAGEMENT
FIN3701 ASSIGNMENT 1
SOLUTIONS 2022



ASSIGNMENT 01 SOLUTIONS SEMESTER 1 2022
MEL

, QUESTION 1


Calculate the net present value (NPV), internal rate of return (IRR) and payback period (Pb) for the
replacement.


Initial investment




Cost of new machine 8 500 000,00
Installation -
Proceeds from sale of old equipment 410 000,00
Book value -300 000,00
Profit 110 000,00
Tax @ 28% -30 800,00 79 200,00
Investment in working capital 475 000,00
Initial investment 8 895 800,00




Year 1 Year 2 Year 3 Year 4


Revenue (70 000 x 85) 5 950 000,00 5 950 000,00 5 950 000,00 5 950 000,00
Variable Costs (70 000 x 38) (2 660 000,00) (2 660 000,00) (2 660 000,00) (2 660 000,00)
Operating income 3 290 000,00 3 290 000,00 3 290 000,00 3 290 000,00
Add: cost savings 180 000,00 180 000,00 180 000,00 180 000,00
Net operating income 3 470 000,00 3 470 000,00 3 470 000,00 3 470 000,00
Less: Depreciation (3 400 000,00) (1 700 000,00) (1 700 000,00) (1 700 000,00)
Add: depreciation allowance
forfeited 100 000,00 100 000,00 100 000,00
EBIT 170 000,00 1 870 000,00 1 870 000,00 1 770 000,00
Less: Tax @ 28% (47 600,00) (523 600,00) (523 600,00) (495 600,00)
NOPAT 122 400,00 1 346 400,00 1 346 400,00 1 274 400,00
Add: depreciation 3 300 000,00 1 600 000,00 1 600 000,00 1 700 000,00
Operating cash inflow 3 422 400,00 2 946 400,00 2 946 400,00 2 974 400,00




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