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Unseen 2 CFM 4017914

The document outlines a financial analysis including project cashflows, incremental taxable income, and equity valuation for a new machine investment. It details costs, revenues, and net cash flows over a five-year period, with a calculated NPV of 138297.4 at a 12% discount rate. Additionally, it provides the weighted average cost of capital (WACC) at 16.31% based on the market values and returns of ordinary shares, preferred shares, and debentures.

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Riccardo van Rensburg
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26 views4 pages

Unseen 2 CFM 4017914

The document outlines a financial analysis including project cashflows, incremental taxable income, and equity valuation for a new machine investment. It details costs, revenues, and net cash flows over a five-year period, with a calculated NPV of 138297.4 at a 12% discount rate. Additionally, it provides the weighted average cost of capital (WACC) at 16.31% based on the market values and returns of ordinary shares, preferred shares, and debentures.

Uploaded by

Riccardo van Rensburg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Riccardo van Rensburg Unseen test 2

4017914
Date
B) Project cashflows: 0 1 2 3 4 5
Cost -600000
Proceeds of new machine 0 0 0 0 114865
Proceeds of old machine 0 0 0 0 0 0
Opportunity proceeds of old machine 0 0 0 0 0 0
Working capital (Calculation A) -63250 -69300 -12127.5 -12733.88 267411.4
Operating cash profits 147500 154875 162618.75 170749.7 179287.2
Sales revenue 550000 577500 606375 636693.8 668528.4
Variable costs -302500 -317625 -333506.25 -350182 -367691
Fixed costs -100000 -105000 -110250 -115762.5 -121551
Opportunity costs 0 0 0 0 0
Sales revenue 0 0 0 0 0
Variable costs 0 0 0 0 0
Fixed costs 0 0 0 0 0
Taxation at 29% 16675 18813.75 21059.4375 23417.41 15704.13
Net cash flows -600000 100925 104388.8 171550.6875 181433.2 577267.7
738297.4 90111.61 83218.11 122106.4 115304.1 327557.2
NPV @12% 138297.4

Incremental taxable income


Operating cash profits 147500 154875 162618.75 170749.7 179287.2
Opportunity costs 0 0 0 0 0
Wear and tear new machine -90000 -90000 -90000 -90000 -90000
Wear and tear old machine 0 0 0 0 0
Tax write off of new machine Calculation B -35135
Recoupment old machine 0 0 0 0 0
Opportunity cost recoupment old machine 0 0 0 0 0
Assessed loss utilised 0 0 0 0 0
Opportunity cost- assesed loss 0 0 0 0 0
Incremental taxable income 57500 64875 72618.75 80749.69 54152.17
(I am assuming that the working capital that is needed can be redeemed in year 5)
Calculation B
Tax value after 5 years of owning machine 150,000 600 000-(600 000x 15/100X5)
Proceeds from sale 114865
Tax write off 35135

Calculation A
Sales 550000 577500 606375 636693.8 668528.4
Opening balance 110000 173250 242550 254677.5 267411.4
Closing balance 173250 242550 254677.5 267411.4
Investment in working capital 63250 69300 12127.5 12733.88 267411.4

A) Equity
Ordinary shares:
Market value 1,300,000
Dividend 200,000

Valuation: 1300000=200000x(1.025)/(ke-0.025)
ke= 0.183
ke= 18.3%

Pref shares:
Market value 300,000
Dividend 30,000

Valuation: 300000=30000x(1.025)/(ke-0.025)
ke=0.1275
Ke=12.75%
Debentures
Market value 400,000
Interest paid 50,000
400 000=50 000/ke

Ke=0.125
ke= 12.5%

ordinary shares 1300000 65% 18.3 11.9


Pref shares 300000 15% 12.75 1.91
Debentures 400000 20% 12.5 2.5
wacc 16.31%
10/25/2021

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