Question 5 (12 Marks) Whittle Ltd is preparing a cash budget for the first six months of the coming year, 2022. The company's financial manager has pulled all the cash sales and income from the past year (2021) and adjusted them for the expected growth in the coming year already and calculated net cash flows for each month, except for collections from credit sales. The system however does not do credit collection estimates, however an ageing report has been generated. Credit sales over the last four months of 2021 were as follows: September R10 000 January R5 000 Credit sales for the first 6 months of 2022 were estimated as follows: February R10 000 March R12 000 May R18 000 1 month 50% October R12 000 January -R10 000 The ageing analysis indicates that on credit sales, payments are usually made as follows for any given month's sales: 2 months 30% November R15 000 April:: May: June: April R14 000 March -R30 000 Structure your answer as follows: Month January: February: March: The net cash flows for the first six months of 2022 excluding the credit collections were estimated as follows: December R45 000 February -R20 000 The cash balance at the start of January is R0. Required: You have been tasked to assist the financial manager with calculating the credit collections for the first six months of 2022 using the past credit sales, estimated credit sales for 2022 and the aging report and then to find the financing requirement for each month using the net cash flows and the credit collections. 3 months 20% April -R40 000 June R25 000 May -R40 000 Credit collection R XXX R XXX R XXX R xxx R XXX R XXX ONLY provide your answers formatted in a table as above for question 5, calculations for question 5 will not be marked. R xxx R XXX R XXX June -R45 000 Financing requirement R xxx R XXX R XXX Total = 50 Marks Question 1 (20 Marks) Powerless Ltd is a recently formed company aiming to provide alternative energy solutions to a broad market. The company currently imports and sells primarily Chinese-built solutions; however, it is in the intermediate stages of planning to build its own local assembly line. The most favoured plan amongst management is to purchase components overseas and to then assemble inverters, solar panels, and battery packs locally, which will require an initial investment of R40 000 000. Based on the sales of the current imported equipment and the expected cost of local assembly, the company expects sales generated by the plant as follows: Year 1 R40 000 000 Year 2 R80 000 000 Year 3 R60 000 000 Year 4 R70 000 000 Cost of sales is expected to amount to 80% of sales, and the initial investment will be written off over five years through the straight-line method for tax purposes. At the end of the project in year 6, it is planned that the company will transition to full-fledged local manufacturing and sell the plant for an expected amount of R20 000 000. The corporate tax rate is 27% and all values provided are in nominal terms. Powerless Ltd uses its WACC of 12% as a discount rate but adds a risk premium based on the coefficient of variation (CV) of the project's expected cash flows. The plant project has a CV of 0.7 associated with its cash flows. The risk premium is allocated as follows: Year 6 Year 5 R100 000 000 R80 000 000 0.8 x WACC if the CV is less than 0.4 1 x WACC if the CV is equal to or greater than 0.4 but less than 0.6. 1.5 x WACC if the CV is equal to or greater than 0.61. An increase of R10 000 000 in net working capital is expected for the project and it is expected that R15 000 000 in net working capital will be recouped at the end of the project. Required: Calculate the NPV of the project and comment on the acceptability, profitability, and risk of the project. Note: All values provided are in nominal terms