FIN4801 Assignment 4
(COMPLETE ANSWERS)
2025 - DUE 8 August 2025
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
FIN4801 Assignment 4 (COMPLETE
ANSWERS) 2025 - DUE 8 August 2025
Course
Advanced Financial Management (FIN4801)
Institution
University Of South Africa (Unisa)
Book
ADVANCED FINANCIAL MANAGEMENT STUDY TEXT.
FIN4801 Assignment 4 (COMPLETE ANSWERS) 2025 - DUE 8 August 2025;
100% TRUSTED Complete, trusted solutions and explanations. Ensure your
success with us..
Mapex Ltd., a geoinformatics company is expanding into drone
manufacturing to diversify its operations. This project has an initial life of 4
years and the initial costs of the machinery (which is the only significant
initial cost) is R800 000 while the related installation costs is R200 000. The
projects are expected to generate sales of R1 500 000 each year (expressed
in real terms). Variable costs are expected to amount to 60% of sales while
fixed costs are expected to be R200 000 (in real terms). The machinery for
the project can be depreciated over 4 years and the tax rate is 27%. The
machinery can be sold for R1 200 000 at the end of the project (in nominal
terms). The company is wholly financed by equity. The risk-free rate is 10%
and the market risk premium is 5%. The company currently has a beta of 1.5
while that of the drone industry is 1.5. Inflation is 4%. Required: Adjust the
cash flows for inflation where necessary and identify the relevant cash flows
of the project (12) Determine the most appropriate discount rate to use for
the project (3) Discuss the acceptability of the project, mention how you
adjusted for inflation and risk and what impact this had on the resultant NPV.
(5) Miles Ltd., a manufacturer of various car products wants to estimate its
funding requirements for the coming financial year. In the recent past, the
company had spare production capacity, but increased sales has raised
suspicions amongst management that investment in new capacity may be
required soon. In the current financial year the company achieved sales of
R200 million on assets worth R3 000 million and liabilities of R800m. It’s
resulting net profit margin was 5% with no dividend being paid as the
company is in a high growth phase. All assets and liabilities are considered
spontaneous and increase in line with sales. It is expected that sales will
grow by 30% in the coming year. Assets are however only utilized up to 90%
of total capacity and the spare capacity can be used first before new
capacity is installed. Required: Determine the amount of funds the company
will require in the coming year. Wheels Ltd sells tyres and wheels on credit
, only. The management of the company estimated that it could increase sales
by offering better credit terms. Currently, the days sales outstanding (or
average collection period) is 12 days. It is expected that this will change to
30 days under the new standards. Sales are expected to increase from
R200m to R230m. No discounts are offered and bad debts are negligible
(zero). The company can borrow short term funds at a rate of 7% and has a
gross profit margin of 8%. What would the net effect of changing its credit
standards on its net profit be? Movies Ltd is preparing a cash budget for the
first six months of the coming year, 2025. The company’s financial manager
has gathered all of its sales estimates and past sales data for the next six
months and the past four months, respectively. Sales over the last four
months of 2024 were as follows: September October November December
R20 000 R15 000 R25 000 R60 000 Sales for the first 6 months of 2025 were
estimated as follows: January February March April May June R40 000 R20
000 R30 000 R50 000 R60 000 R80 000 20% of sales are cash while the
remainder are on credit. The ageing analysis indicates that on credit sales,
payments are usually made as follows for any given month’s sales: 1 month
2 months 3 months 50% 30% 20% Every month, the company has purchases
and other expenses that equal 40% of its total sales for the month. The
company also has fixed costs of R10 000 per month. In February, the
company expects to pay a bonus to staff which will cost R40 000 in total
while in May, new equipment worth R100 000 will be paid for. The cash
balance at the start of January is R0. The company can finance any cash
deficits using a line of credit at a cost of 1% of the outstanding balance of
the previous month paid during the next month (ie. A balance of -R100 in
January, will have interest payments having to take place in February).
Required: Compile a cash budget for Movies limited for January to June 2025
and clearly indicate any financing costs. Also, provide a brief overview of the
company’s cash flow situation over the period. Zincsupp Pty (Ltd) is
expecting a cash shortfall of R80 000 in March and one of R90 000 in April.
The financial manager of the company has arranged for an overdraft facility
with a local bank at a cost of 12% per annum, paid on the outstanding
balance at the end of each month. It is expected that during May, the
company will receive a large payment and will repay the balance on the
facility and not experience another shortfall in the financial year. Determine
the total cost of financing the shortfall over March and April. Company X
hired a consultant to determine a sales growth function. The consultant
gathered past monthly sales data and came up with the following regression
equation: Y = 0.1x + 15. Where Y is the sales level in millions and X is the
nth data point. Use the equation to estimate sales for the coming month
which will be the 22nd data point (ie. Point 22 on the x – axis if represented
on a chart with y being sales).
Mapex Ltd.
1. Relevant Cash Flows
(COMPLETE ANSWERS)
2025 - DUE 8 August 2025
NO PLAGIARISM
[Pick the date]
[Type the company name]
,Exam (elaborations)
FIN4801 Assignment 4 (COMPLETE
ANSWERS) 2025 - DUE 8 August 2025
Course
Advanced Financial Management (FIN4801)
Institution
University Of South Africa (Unisa)
Book
ADVANCED FINANCIAL MANAGEMENT STUDY TEXT.
FIN4801 Assignment 4 (COMPLETE ANSWERS) 2025 - DUE 8 August 2025;
100% TRUSTED Complete, trusted solutions and explanations. Ensure your
success with us..
Mapex Ltd., a geoinformatics company is expanding into drone
manufacturing to diversify its operations. This project has an initial life of 4
years and the initial costs of the machinery (which is the only significant
initial cost) is R800 000 while the related installation costs is R200 000. The
projects are expected to generate sales of R1 500 000 each year (expressed
in real terms). Variable costs are expected to amount to 60% of sales while
fixed costs are expected to be R200 000 (in real terms). The machinery for
the project can be depreciated over 4 years and the tax rate is 27%. The
machinery can be sold for R1 200 000 at the end of the project (in nominal
terms). The company is wholly financed by equity. The risk-free rate is 10%
and the market risk premium is 5%. The company currently has a beta of 1.5
while that of the drone industry is 1.5. Inflation is 4%. Required: Adjust the
cash flows for inflation where necessary and identify the relevant cash flows
of the project (12) Determine the most appropriate discount rate to use for
the project (3) Discuss the acceptability of the project, mention how you
adjusted for inflation and risk and what impact this had on the resultant NPV.
(5) Miles Ltd., a manufacturer of various car products wants to estimate its
funding requirements for the coming financial year. In the recent past, the
company had spare production capacity, but increased sales has raised
suspicions amongst management that investment in new capacity may be
required soon. In the current financial year the company achieved sales of
R200 million on assets worth R3 000 million and liabilities of R800m. It’s
resulting net profit margin was 5% with no dividend being paid as the
company is in a high growth phase. All assets and liabilities are considered
spontaneous and increase in line with sales. It is expected that sales will
grow by 30% in the coming year. Assets are however only utilized up to 90%
of total capacity and the spare capacity can be used first before new
capacity is installed. Required: Determine the amount of funds the company
will require in the coming year. Wheels Ltd sells tyres and wheels on credit
, only. The management of the company estimated that it could increase sales
by offering better credit terms. Currently, the days sales outstanding (or
average collection period) is 12 days. It is expected that this will change to
30 days under the new standards. Sales are expected to increase from
R200m to R230m. No discounts are offered and bad debts are negligible
(zero). The company can borrow short term funds at a rate of 7% and has a
gross profit margin of 8%. What would the net effect of changing its credit
standards on its net profit be? Movies Ltd is preparing a cash budget for the
first six months of the coming year, 2025. The company’s financial manager
has gathered all of its sales estimates and past sales data for the next six
months and the past four months, respectively. Sales over the last four
months of 2024 were as follows: September October November December
R20 000 R15 000 R25 000 R60 000 Sales for the first 6 months of 2025 were
estimated as follows: January February March April May June R40 000 R20
000 R30 000 R50 000 R60 000 R80 000 20% of sales are cash while the
remainder are on credit. The ageing analysis indicates that on credit sales,
payments are usually made as follows for any given month’s sales: 1 month
2 months 3 months 50% 30% 20% Every month, the company has purchases
and other expenses that equal 40% of its total sales for the month. The
company also has fixed costs of R10 000 per month. In February, the
company expects to pay a bonus to staff which will cost R40 000 in total
while in May, new equipment worth R100 000 will be paid for. The cash
balance at the start of January is R0. The company can finance any cash
deficits using a line of credit at a cost of 1% of the outstanding balance of
the previous month paid during the next month (ie. A balance of -R100 in
January, will have interest payments having to take place in February).
Required: Compile a cash budget for Movies limited for January to June 2025
and clearly indicate any financing costs. Also, provide a brief overview of the
company’s cash flow situation over the period. Zincsupp Pty (Ltd) is
expecting a cash shortfall of R80 000 in March and one of R90 000 in April.
The financial manager of the company has arranged for an overdraft facility
with a local bank at a cost of 12% per annum, paid on the outstanding
balance at the end of each month. It is expected that during May, the
company will receive a large payment and will repay the balance on the
facility and not experience another shortfall in the financial year. Determine
the total cost of financing the shortfall over March and April. Company X
hired a consultant to determine a sales growth function. The consultant
gathered past monthly sales data and came up with the following regression
equation: Y = 0.1x + 15. Where Y is the sales level in millions and X is the
nth data point. Use the equation to estimate sales for the coming month
which will be the 22nd data point (ie. Point 22 on the x – axis if represented
on a chart with y being sales).
Mapex Ltd.
1. Relevant Cash Flows
