1. Summative Assessment 2 (SA 2) must be handed in online before or on the day of the Summative Assessment 1 (SA 1) sitting. 2. You must make use of Microsoft Excel to complete this assessment. 3. Follow the instructions carefully 4. Only complete cells marked in yellow 5. Upload your completed Microsoft Excel Template onto ColCampus as well your signed plagiarism form attached at the end of this document, 113 HEMN331-1-Jul-Dec2021-SA2-V3-ES-25052021 SCENARIO (20 MARKS) You are employed at Necessity Ltd ("Necessity"), an entity which designs and manufactures basic, everyday clothing items. Necessity just finished designing a new jean which they wish to start producing and selling In order to manufacture jeans, Necessity will have to purchase a new machine ("S115 DY"). The machine has a cost price of R17 860 540 and will be depreciated over a period of 5 years according to the straight-line method. S115DY will also qualify for section 12C wear-and-tear deductions according to which 40% may be deducted in the first year and 20% each year thereafter. Necessity will elect the straight-line method for income tax deduction purposes. Thereafter, S115DY will be sold after 4 years, at which point it will have a residual value of R1 083 000. The machine has an annual capacity to manufacture 65 000 units ("jeans") which will be fully utilised by Necessity. Below is the cost and selling price of the jean: Cost price per unit Selling price per unit R120 R370 The investment in working capital (which will be 35% of the annual sales) will take place at the beginning of the year and remain at this level for the years thereafter. Only at the end of the second last year, will it decrease to 12%. Assume that any remaining working capital balance will be recovered in the last year and will not affect the tax charges. The current clothing items which Necessity are selling are generating before-tax operating cash flows of R102 000 000 per annum which will be maintained in the future. Necessity's cost of capital is 12.4%. The South African income tax rate for companies is 28% 114 HEMN331-1-Jul-Dec2021-SA2-V3-ES-25052021 STEPS TO FOLLOW AND REQUIRED: 1. You are busy calculating the net present value of machine S115DY. 2. Open the Excel Answer Book you have been provided with on ColCampus. . 3. Perform research on the following Excel formulas: Add (including "SUM" formula), subtract, multiply and divide. NPV calculation. Absolute cell referencing in Excel using the "$" sign. Referencing between various Excel sheets. . 4. By using the above formulas, complete the all the yellow highlighted cells in the Excel answer book by calculating the following: The total cash flows Tax payable /refundable Net Present Value (NPV) . TAKE NOTE OF THE FOLLOWING: Only complete cells marked in yellow. Refer to other cells in your calculations/formulas where possible. Do not enter any amount/figure. Only use the above formulas and information already included on the tab. Make use of absolute cell referencing as far as possible. Evidence required: When you are satisfied that your formulas are correct, then go to Formulas > Show Formulas. Your tab will change so that all of the cells where you entered formulas now display the actual formula that you entered. Take a screen print of the screen with all the formulas and submit this, along with question 1, for assessment. You will also need to submit a copy of your Excel spreadsheet with all the formulas entered into it. 10 Q : NPV Analysis YEARD YEAR 2 YEAR3 YEAR4 CASH FLOWS Cost YEAR 1 17 R1 54000 Deprecato Non cash fowie Castidbwfom sales Castoutfowfrom costbomentueses Residualvalle Viene cotel Tax Total cash flows Net Present Value (NPV) Workings YEAR O YEAR 1 YEAR 2 YEAR 3 YEAR 4 TAX Earnings Wear-and-tear Recoupment Taxable income Tax payable/refundable 1 083 000,00 OTHER INFORMATION: Selling price per unit Cost price per unit Annual demand: 370 120 65 000 Investment in working capital: 35% 12% Wear-and-tear percentages 40% 20% Necessity's cost of capital Companies' tax rate 12.40% 28% U 1. Summative Assessment 2 (SA 2) must be handed in online before or on the day of the Summative Assessment 1 (SA 1) sitting. 2. You must make use of Microsoft Excel to complete this assessment. 3. Follow the instructions carefully 4. Only complete cells marked in yellow 5. Upload your completed Microsoft Excel Template onto ColCampus as well your signed plagiarism form attached at the end of this document, 113 HEMN331-1-Jul-Dec2021-SA2-V3-ES-25052021 SCENARIO (20 MARKS) You are employed at Necessity Ltd ("Necessity"), an entity which designs and manufactures basic, everyday clothing items. Necessity just finished designing a new jean which they wish to start producing and selling In order to manufacture jeans, Necessity will have to purchase a new machine ("S115 DY"). The machine has a cost price of R17 860 540 and will be depreciated over a period of 5 years according to the straight-line method. S115DY will also qualify for section 12C wear-and-tear deductions according to which 40% may be deducted in the first year and 20% each year thereafter. Necessity will elect the straight-line method for income tax deduction purposes. Thereafter, S115DY will be sold after 4 years, at which point it will have a residual value of R1 083 000. The machine has an annual capacity to manufacture 65 000 units ("jeans") which will be fully utilised by Necessity. Below is the cost and selling price of the jean: Cost price per unit Selling price per unit R120 R370 The investment in working capital (which will be 35% of the annual sales) will take place at the beginning of the year and remain at this level for the years thereafter. Only at the end of the second last year, will it decrease to 12%. Assume that any remaining working capital balance will be recovered in the last year and will not affect the tax charges. The current clothing items which Necessity are selling are generating before-tax operating cash flows of R102 000 000 per annum which will be maintained in the future. Necessity's cost of capital is 12.4%. The South African income tax rate for companies is 28% 114 HEMN331-1-Jul-Dec2021-SA2-V3-ES-25052021 STEPS TO FOLLOW AND REQUIRED: 1. You are busy calculating the net present value of machine S115DY. 2. Open the Excel Answer Book you have been provided with on ColCampus. . 3. Perform research on the following Excel formulas: Add (including "SUM" formula), subtract, multiply and divide. NPV calculation. Absolute cell referencing in Excel using the "$" sign. Referencing between various Excel sheets. . 4. By using the above formulas, complete the all the yellow highlighted cells in the Excel answer book by calculating the following: The total cash flows Tax payable /refundable Net Present Value (NPV) . TAKE NOTE OF THE FOLLOWING: Only complete cells marked in yellow. Refer to other cells in your calculations/formulas where possible. Do not enter any amount/figure. Only use the above formulas and information already included on the tab. Make use of absolute cell referencing as far as possible. Evidence required: When you are satisfied that your formulas are correct, then go to Formulas > Show Formulas. Your tab will change so that all of the cells where you entered formulas now display the actual formula that you entered. Take a screen print of the screen with all the formulas and submit this, along with question 1, for assessment. You will also need to submit a copy of your Excel spreadsheet with all the formulas entered into it. 10 Q : NPV Analysis YEARD YEAR 2 YEAR3 YEAR4 CASH FLOWS Cost YEAR 1 17 R1 54000 Deprecato Non cash fowie Castidbwfom sales Castoutfowfrom costbomentueses Residualvalle Viene cotel Tax Total cash flows Net Present Value (NPV) Workings YEAR O YEAR 1 YEAR 2 YEAR 3 YEAR 4 TAX Earnings Wear-and-tear Recoupment Taxable income Tax payable/refundable 1 083 000,00 OTHER INFORMATION: Selling price per unit Cost price per unit Annual demand: 370 120 65 000 Investment in working capital: 35% 12% Wear-and-tear percentages 40% 20% Necessity's cost of capital Companies' tax rate 12.40% 28% U