Description

FIN3701 ASSIGNMENT 1 2026

QUESTION 1

Bottling Ltd is a manufacturer of glass bottles. The company has been advised by a
consultant tointroduce plastic bottles for the 2027 Rugby World Cup, as glass bottles
will not be allowed in any ofthe stadiums. The consultant charged a fee of R14 000 for
conducting the market study.
To produce the plastic bottles, the company will need to purchase a machine costing
R120 000, as wellas two moulds – one for the containers and one for the lids – at a total
cost of R22 000. The machinewill be depreciated using the straight-line method over a
useful life of two years. At the end of the twoyear period, the machine is expected to be
sold for 23% Of its original cost. The consultant estimates sales of R80 000 in the first
year, with a projected decrease of 10% in thesecond year. The total fixed costs are
expected to be R4 500 per year, while variable costs areestimated at 15% of sales.

REQUIRED:
1.1 Calculate the initial investment required for the purchase of the new machine
and the two

1.1 Initial investment