Q1. You have been asked by the Chief Executive Officer of Khaola Construction Company to evaluate the proposed acquisition of a new equipment costing M50 000. The equipment is to be depreciated for three years at 1/3%, 44.45%, 14.81%, and 7.41% for years 1, 2, 3, and 4 respectively as the purchase is approximated as being half way through the first year. The company will incur M10 000 to modify the equipment for any special use. The equipment would be sold after three years for M20 000 and it would require an increase in net working capital of M2 000 at the start of the project, and this would be recovered at the end of the project with the company saving M20 000 annually before tax operating costs. The tax rate is 40%. Required: (a). What are the operating cash flows in years 1, 2 and 3? (b). Calculate the termination cash flow of the project for the company (c). Calculate the tax payable by the company (10marks). (3marks). (5marks). Q2. Rantekoa Computer Chips Company is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next two years, at 13% in the third year, and a constant rate of 6% thereafter. The company's last dividend was M1.15, and the required rate of return on the share is 12%. Required: (i). Calculate the value of the share today (10marks). (3marks). (ii). Calculate the share price in one year's time (iii). Calculate the dividend yield and capital gains yield for year 1 (4marks). Q3. Rosina Lesotho Plc has a branch office in Belgium which exports goods to the USA and invoices its customer for $526 000 payable in July. It is now May: Spot EUR/USD 0.7320-0.7345 Spot EUR/USD 0.7210 -0.7228 (August) In August USD/EUR futures contracts are priced at 73.55 (per $100). The contract size is $20 000. And the: Required: (a). If the future hedge is set up, calculate the profit or loss on target receipts (6marks). (b). Calculate the profit or loss on futures position if August futures is bought at 72.22 (per $100) (9marks)