Question a: Blue Ltd is considering an investment which requires the purchase of a machine costing 550.000 in January of current year. Cash inflows from the project are expected to be 75.000 in year 1 and increasing by 5% per year over the next 5 years. Purchases of raw materials are 35,000 in year 1 and increasing by 6% per year over the next 5 years. At the end of the investment, it is estimated that the residual (scrap) value of the machine is 75.000. The company has as year-end in December and pays tax at 12.5% one year in arrears. The companys real cost of capital is 8.5% and the general inflation rate is 7.5%. WDAs are at 20% using the reducing balance method. Required: Decide whether the company must accept the investment. (11 marks)

Question b: Describe the financial and non-financial objectives of a company and state which one you consider more important from each category and why? (2 marks)

Question c: Pink Ltd has daily demand for product A of 50 for each of the 365 working days of the year. The product A is purchased from a local supplier for 2.50 each. The cost of placing an order is 57 per order, regardless of the size of the order. The inventory holding cost per unit per year is equal to the 27% of the purchase price. Required: Calculate the economic order quantity. (2 marks)

Question d: A company has annual credit sales of 26 million and related cost of sales of 17 million. The company has the following targets for the next year: Trade receivables days 90, Inventory days 30, trade payables 60 days Assume there are 365 days in the year. Required: Calculate the net investment in working capital required for next year. (2 marks