Explora Limited is a very successful manufacturing organisation operating mainly in South Africa and servicing a large portfolio of clients. The Board and Executives have focussed on growing the organisation, making it sustainable and profitable, amidst a very challenging external environment gripped with uncertainty. For this reason, there is a greater focus on effective strategy implementation and monitoring, as well as effective utilisation of resources. All these have been well fused into the Explora Limited$$s Business Model so that the organisation continues to add value to its clients.

An extract from the financial information reveals the following:

Assets

Land and Building R$236$ million

Machinery R$516$ million

Inventory R$53$ million

Others

Long Term loan $(10$ years$)$ at $10\%$ interest R$625$ million $($discount rate is $10\%)$

Number of customers $23000$

Number of consumers of their products $456000$

Revenue per annum R$194$ million

The long$-$term loan is for financing a $10$ year project which yields Revenue of R$80$ million per annum based on a discount rate of $10\%.$

The business is considering another project using the same long term loan but this will be based on a $5\%$ discount rate but the Revenue will be R$100$ million per annum.

Below is a depiction of the Explora Business Model with the resources utilised reflected in the $6$ Capitals.

Required

a$.$ From the above Explora Business Model, identify all the resources $(6$ Capitals$).$ Describe what each one of these mean and provide possible examples for each Capital $15$ marks

b$.$ In implementing its strategy, Explora utilises Capital Budgeting to evaluate long$-$term projects. The following methods are used: Payback Period; Discounted Payback Period; Net Present Value.

Briefly describe what each one of these methods mean $15$ marks

PLEASE NOTE: YOU ARE NOT EXPECTED TO CALCULATE DISCOUNTED CASH FLOWS OR NET PRESENT VALUES. ONLY USE THE NUMBERS TO DESCRIBE THE METHODS AND HOW THEY DIFFER

TOTAL $30$ Marks