Please assist with Project Financial Management

QUESTION ONE

Bella Limited has examined the use of a new product which is assumed to improve profitability. You are required to analyse the following data in order to assist Bella Limited decide on whether or not the new project is in fact viable. INFORMATION The data provided is based on expected sales of 15000 units with a selling price per unit of R810. The costs associated with this project includes the following: Direct materials cost (R2 700 000), Direct labour cost (R1 800 000), Variable overhead costs (765 000), Fixed manufacturing overhead costs (R702000) and Fixed administrative and selling costs (R167400). In addition, selling commission per unit sold is 10%. REQUIRED Study the information provided below and answer each of the following questions independently:

1.1 Calculate the sales quantity and sales value required to break even. (5 marks)

1.2 Based on the expected sales volume of 15 000 units, determine the sales price per unit that will enable the company to break even.(5 marks)

1.3 If sales are 16 000 units, how much can the company spend on additional advertising and achieve an operating profit of R 5 000 000?(5 marks)

1.4 Should management consider a selling price of R830, if the sales volume is expected to decrease by 300units? Motivate your answer showing the relevant calculations.

1.5 Suppose more sales persons are employed, thereby increasing fixed salaries by R240000 but increasing sales by 500 units. Will profitability improve? Motivate your answer showing the relevant calculations. (5 marks)

QUESTION TWO

2.1 You want to begin saving for your daughters college education and you estimate that she will need R170 000 in 15 years. If you feel confident that you can earn 8.5% per year, how much do you need to invest today? (6 marks)

2.2 Suppose your company expects to increase unit sales of widgets by 16% per year for the next 6 years. If you currently sell 2 million widgets in one year, how many widgets do you expect to sell in 6 years? (6 marks)

2.3 You are looking at an investment that will pay R1 500 in 4 years if you invest R800 today. What is the implied rate of interest? (8 marks)

2.4 You want to purchase a new car and you are willing to pay R400 000. If you can invest at 11% per year and you currently have R300 000, how long will it be before you have enough money to pay cash for the car? (5 marks)