QUESTION 1: Study Unit 1 - Marketing = shareholder value creation

1.1 You are the marketing manager for a technology manufacturer, Washed Water, that produces water purification products for businesses. You have recently launched a customer referral campaign offering one year's free maintenance to customers who refer a new customer. Discuss how this campaign can influence shareholder value creation through the financial perspective of Washed Water's balanced scorecard. You need to refer to other balanced scorecard perspectives. Your answer needs to be specific and detailed and show insight.

1.2 Marketing activities add value to an organisation's product offering. Research, describe and discuss one (1) example of a successful business-to- business (B2B) marketing referral strategy.

1.3Washed Water, a technology manufacturer that produces water purification products for businesses, is keen to expand geographically. Explain, why increasing its free cash flow (FCF) is important to accomplish this strategy.

1.4Please read the excerpt below from the Daily Maverick on 24 October 2019 and answer the following question:

'Profits go Boeing Boeing gone Boeing recorded a 53% drop in quarterly profit today, with much of the financial blow coming from its grounded 737 MAX fleet. The aircraft company posted a negative free cash flow of $2.89-billion for the quarter, down from over $4-billion in profit in the same quarter a year ago.'

Discuss what could have caused Boeing's negative free cash flow of $2,89 billion. (3)

1.5An investor purchased 6 800 shares for R17,62 per share in 2018. He sold 1 800 shares for R19,40 shortly before dividends of 60c per share were declared. A year later, in 2019, his total wealth was R122 920, including shares and cash from the share sale.

1.5.1Calculate the share price in 2019.Round off the calculated share price to the nearest cent. (3)

1.5.2Calculate the percentage return the shareholder has achieved between 2018 and 2019. (1)

1.6Washed Water, a technology manufacturer that produces water purification products for businesses, had net cash flows of R14 280 000 from operating activities in 2017. Dividends are R1 245 000. Inventory cost R11 645 000 in 2017, with equipment repairs and maintenance amounting to R1 445 000. Its 2016 free cash flow (FCF) is calculated as R5 135 000.

1.6.1 Calculate Washed Water's capital expenditure.

1.6.2 Washed Water is predicting its FCF next year (year 1) to be R5 000 000. The free cash flows are expected to grow by 7% each year. The company has a weighted average cost of capital of 16%. Ignoring the FCF from previous years, calculate the NPV of the company's future FCFs.

Use the template below for your calculations.

Year 1 Year 2 Year 3

FCF

Terminal value

Total FCF value

NPV