QUESTION $3(20$ Marks$)$

$3\mathrm{.}1.$ Use the information provided below to answer the following question. $(10$ Marks$)$

INFORMATION

Fogram Limited $($FL$)$ has reported operating profits of R$40$ million. This was after charging R$12$ million for

the development and launch costs of a new product that is expected to generate profits for $5$ years.

Taxation is paid at the rate of $30\%$ of the operating profit.

FL has a risk$-$adjusted weighted average cost of capital of $15\%$ per annum and is paying interest at $10\%$

per annum on a substantial long$-$term loan. FL$\text{'}$s non$-$current asset value is R$50$ million, and the net current

assets have a value of R$20$ million. The replacement cost of the non$-$current assets is estimated to be R$80$

million.

Required

Calculate the FL$\text{'}$s Economic Value Added $($EVA$)$ for the period.

$3\mathrm{.}2.$ Using the information provided below, answer the following questions. $(10$ Marks$)$

INFORMATION

The excerpts of financial statements provided below relate to Bettencourt Enterprises Limited $($BEL$)$ for

the year ended $31$ December $2022.$

BETTENCOURT ENTERPRISES LIMITED

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED $31$ DECEMBER $2022$

$20222021$

R R

Revenue $125000000119500000$

Cost of sales $(103600000)(101575000)$

Gross profit $2140000017925000$

Operating costs $(11600000)(11233000)$

Finance costs $(3600000)(3600000)$

Profit before tax $62000003092000$

Corporate tax $(1736000)865760$

Profit for the year $44640002226240$

BETTENCOURT ENTERPRISES LIMITED

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER $2022$

$20222021$

R R

Assets

Non$-$current assets

Property $16200000)16200000)$

Owned plant $2520000025200000$

Leased plant $2440000020500000$

$6580000061900000$

Current assets $3280000028000000$

Total asset $9860000089900000$

Equity and Liabilities

Equity

Shareholders$$ equity shares of R$1$ each $1800000018000000$

Property revaluation surplus $80000002000000$

Retained earnings $2120000020000000$

$4720000040000000$

Non$-$current liabilities

$10\%$ loan notes $2000000016600000$

Finance lease obligations $1280000012800000$

$3280000029400000$

Current liabilities

Finance lease obligations $42000004200000$

Other current liabilities $1440000016300000$

$1860000020500000$

Total equity and Liabilities $9860000089900000$

$3\mathrm{.}2\mathrm{.}1.$ Calculate the return on shareholders$$ equity $($ROE$)$ for the $2021$ and $2022$ financial years, and comment

on the outcome of the calculation $($round off answers to two decimal places$).$

$(4$ marks$)$

$3\mathrm{.}2\mathrm{.}2.$ Using the DuPont model, analyse and comment on the impact of Bettencourt$$s operational efficiency,

asset utilization and financial leverage on the return on shareholders$$ equity for the year ended $31$ December

$2022($round off each to four decimal places$).$ It is important that you indicate whether the business has

become more efficient and$/$or riskier during the $2022$ financial year.