9.5 The assessments KINDLY NOTE THAT THERE ARE TWO COMPULSORY ASSIGNMENTS FOR THE SECOND SEMESTER. Assignment 01 - Semester 2 Due date: 17 August 2023 Unique number: 614237 The purpose of this assignment is to evaluate your knowledge of the fundamental aspects of decision making for long-term investment. Study Chapters 9, 10, 11 and 12 of the prescribed book and the relevant learning units to complete this assessment. QUESTION 1 [8 marks] Selby industries is considering replacing its existing machine which was purchased 3 years ago at a cost of R1 million. The machine is depreciated at \20 per annum and can be sold today at R800 000. The new machine will cost R750000 with R20 000 installation cost and R5000 transportation costs. The use of the new machine will decrease the working capital with R7 000. Assume a \40 capital gains tax per annum. REQUIRED: 1.1 Calculate the book value of the existing machine, Show all calculations. (2 marks) 1.2 Calculate the tax implication from the sale of the existing machine. (2 marks) 1.3 Calculate the after-tax proceeds from the sale of the existing machine. (2 marks) 1.4 Calculate the initial investment associated with the replacement of the existing machine. (2 marks) A firm with cost of capital of \10 is evaluating two mutually exclusive projects, \\( X \\) and \\( Y \\). The initial investment is R350 000 for project \\( X \\) and \\( R 425000 \\) for project \\( Y \\). Cash inflows associated with the two projects are given below. REQUIRED: Which project should the firm choose, considering risk concepts in capital budgeting? (12 marks) Bonga currently has a portfolio of ordinary shares representing several different companies. Bonga considers it to be a well-balanced investment portfolio, but he wants to reduce the overall risk of the portfolio a bit more by including ordinary shares from Titan Mining Corporation. The following information on Titan Mining Corporation is avallable: For the period 2017 to 2020, the company paid the following dividends per year respectively: \\( R 3,14 ; R 3,55 ; R 3,89 \\); and \\( R 3,95 \\). The 2021 dividend is expected to increase by the average growth rate of the dividends between 2017 and 2020, and the dividend will increase by \10 per year indefinitely from 2022 onwards. Bonga requires a return of \15 on his investment portfolio and is not prepared to pay more than R52,00 per ordinary share of Titan Mining Corporation REQUIRED: 4.1 Calculate the current price of Titan Mining Corporation's ordinary share. (8 marks) 4.2 Should Bonga purchase Titan Mining Corporation shares to include in his investment portfolio? Provide reasons for your answer. (2 marks)