QUESTION $1(25$ Marks$)$

Information

ABC Company is a manufacturer of widgets. The company has provided the following financial information for the year

$2023$:

Selling Price per Widget R$10$

Direct Materials per Widget R$1\mathrm{.}50$

Direct Labour per Widget R$1\mathrm{.}80$

Variable overheads per Widget R$0\mathrm{.}70$

Fixed cost R$20000$

Expected sales for $202310000$ widgets

Required:

Calculate the following breakeven and profit$-$related metrics, providing both the formula and the calculation:

$1\mathrm{.}1$ Breakeven Quantity $($in units$).(4$ Marks$)$

$1\mathrm{.}2$ Breakeven Value $($in rands$).(4$ Marks$)$

$1\mathrm{.}3$ Margin of Safety $($in rands and percentage$).(8$ Marks$)$

$1\mathrm{.}4$ Number of Sales Units Required to Achieve a Profit of R$15,000.(5$ Marks$)$

$1\mathrm{.}5$ Calculate the new breakeven quantity if the selling price increases to R$12$ while other factors remain the

same.

$(4$ Marks$)$

QUESTION $2(25$ Marks$)$

INFORMATION

The following information relates to two projects under consideration by CRMP Limited:

Project X Project Y

Initial cost R$1555000$ R$1550000$

Expected life $7$ years $7$ years

Expected scrap value $00$

Expected net cash flows: R R

End of year $1450000420000$

$2420000420000$

$3400000420000$

$4200000420000$

$5180000420000$

$6350000420000$

$7450000420000$

The company estimates that its cost of capital is $13\%.$

REQUIRED

Study the information provided below and answer the following questions:

$2\mathrm{.}1$ Calculate the Payback Period of both projects $($answers expressed in years, months and days.$)$ Which

project would you choose on the basis of payback period? Why?

$(7$ Marks$)$

$2\mathrm{.}2$ Calculate the Accounting Rate of Return for both projects $($answer expressed to two decimal places$).(6$ Marks$)$

$2\mathrm{.}3$ Calculate the Net Present Value for both projects. $($Round off amounts to the nearest Rand.$)(6$ Marks$)$

$2\mathrm{.}4$ Based on your calculations from $2\mathrm{.}12\mathrm{.}3,$ which project should CRMP Limited choose? Why? $(2$ Marks$)$

$2\mathrm{.}5$ Explain the concept of the "Internal Rate of Return $($IRR$)"$ in the context of financial decision$-$making.

Describe the significance of IRR when evaluating investment projects.

$(4$ Marks$)$

QUESTION $3(25$ Marks$)$

Company XYZ is a manufacturing company. You have been provided with the following financial information for the year

$2023$:

Total Assets: R$5,000,000$

Total Liabilities: R$2,000,000$

Shareholders' Equity: R$3,000,000$

Net Sales: R$4,000,000$

Cost of Goods Sold $($COGS$)$: R$2,500,000$

Operating Expenses: R$800,000$

Net Income: R$600,000$

Dividends Declared: R$200,000$

Required:

Calculate and analyze the following financial ratios, providing both the calculation and an explanation of what each ratio

measures. In addition, provide insights into Company XYZ$\text{'}$s financial performance based on your calculations.

$$ Debt$-$to$-$Equity Ratio.

$$ Gross Profit Margin.

$$ Operating Profit Margin.

$$ Net Profit Margin.

$$ Return on Assets $($ROA$).$

$$ Return on Equity $($ROE$).$

QUESTION $4(25$ Marks$)$

Case Study $-$ Retirement Planning

John is a $30-$year$-$old professional planning for his retirement. He wants to assess the financial impact of different

investment scenarios. He's considering investing a lump sum amount and wants to compare two options:

Option A: Invest R$50,000$ today for $30$ years.

Option B: Invest R$5,000$ per year for $30$ years.

Required:

$4\mathrm{.}1$ John's expected annual interest rate is $6\%.$ Help John evaluate both investment options using present

value $($PV$)$ and future value $($FV$)$ calculations. Calculate and compare the following for each option:

$$ The Future Value $($FV$)$ of the investment at the end of $30$ years.

$$ The Present Value $($PV$)$ of the investment $($if applicable$).$

$(18$ Marks$)$

$4\mathrm{.}2$ You plan to buy a house worth R$500,000,$ and you currently have R$100,000$ saved for this goal. If you can

invest your savings at an annual interest rate of $6\%,$ how long will it take for your savings to grow to the

required R$500,000$ for purchasing the house?

$(7$ Marks$)$

END OF PAPER