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MAC2602 ASSIGNMENT 2 SEMESTER 1 2025 – FULLY ANSWERED. DUE 7 APRIL 2025. ALL QUESTIONS ANSWERED. Question 1
1.1. In A SWOT analysis, threats relate to
external factors that are outside the organisation. Which of the following statements are all
examples of threats?
I) Increasing market competition has resulted in excess supply capacity.
II) Industrial strikes by employees.
III) Excessive raw material wastage in the production process.
IV) Price wars amongst serial market competitors and rivalries.
V) Insufficient investment in research and development facilities.
The correct answer is:
A) Statements I, II, and III.
B) Statements I, II, IV, and V.
C) Statements I, II, and IV.
D) Statements II, III, IV, and V.
1.2. Which of the following statements is incorrect regarding debt financing?
A) Debt financing requires the repayment of debt and the related interest.
B) The cost of obtaining some forms of debt is lower than the cost of issuing ordinary shares.
C) Interest expense relating to debt financing can be deducted for taxation purposes.
D) Debt financing does not influence the risk profile of an organisation.
1.3. Which of the following statements is false regarding goals and outcomes of a strategic
planning process?
A) Goal hierarchy deals with how an organisation allocates its available and sometimes scarce
resources.
B) A principal goal when drafting a strategic plan is to develop it in such a way that it can be
turned easily into action plans.
C) Goal congruency has to do with the alignment of different departments’/ units’ goals and
objectives with each other and the overall goals and objectives of an organisation.
D) Goal sequencing refers to how an organisation would arrange its goals in such a manner that
achieving one goal leads to working on the next goal.
1.4. Inventory management refers to the methods the organisation uses to control its inventories.
Which of the following methods/ models is not used by organisations to manage inventories?
A) The Economic Order Quantity.
B) The Stock Market Index.
C) Just-In-Time inventory system.
D) Re-ordering and Safety stock system.
Question 2
The MTN Group Limited (“MTN”) is a South African-based multinational corporation and mobile
telecommunications provider. The company is listed on the Johannesburg Stock Exchange and has a
31st December financial year-end. MTN is present in more than 20 countries in Asia and the rest of the
African continent. Towards the end of December 2024, the company announced the total disposal of
its investment in the Republic of Guinea due to a strategic shift and geopolitical challenges. In South
Africa, the shrinking household disposable income has also resulted in increasing bad debts.
Furthermore, this has led to a reduction in subscriber base growth over the last couple of years. MTN
recently announced that it will slash its South African capital expenditure by up to R4,1 billion for the
upcoming financial year. You received the following information regarding MTN’s 31 December 2024
financial position:
Ordinary share capital Additional information 1
Debentures Additional information 2
Long-term liabilities Additional information 3
Additional information:
1. MTN has 1 000 000 000 ordinary shares in issue. The shares were issued at an average price of R8
per share, and the shares were trading at R10 each on 31 December 2024. The dividend paid per share
for the year ended 31 December 2024 was 345 cents. The South African government bonds’ current
yield is 12%, Beta is estimated at 1,4, and the market risk premium is currently 8%.
2. Included in the long-term liabilities are 30 000 000 debentures issued at a nominal value of R100.
The debentures are redeemable at nominal value in six years and currently pay an annual coupon of
10%. The pre-tax market return on similar debentures is 8%.
3. The other long-term liabilities consist of the term-loan MTN took out to fund various capex
requirements. The loan amount is R3 billion and is repayable in full in five years. The loan bears
interest at 10% per annum, and the current interest rate for similar loans is 11%.
4. The current company taxation rate is 27%.
A) Identify and briefly discuss seven (7) factors that are evident from the given scenario that
MTN should consider that may affect its operations.
B) Calculate the weighted average cost of capital (WACC) of MTN on 31 December 2024.
Question 3
SunTank (Pty) Limited (“ST”) is South Africa’s leading solar geysers manufacturing company.
Founded in 1994, this family-owned company is still led by the first-generation members, although the
owners have a bad credit rating. ST manufactures and distributes the geysers from its facility situated a
few kilometers outside Phelindaba, Pretoria, in the Gauteng Province. A recent visit by a delegation
from the Department of Labour Inspectors revealed that the company has in its employment illegal
foreign nationals despite the unemployment crisis in the area. Furthermore, the plant does not meet the
minimum requirements of the industry’s ISO 200.
The owners of ST are considering investing in a new solar geyser manufacturing plant. This is based
on the expected demand increase due to above-inflation electricity increases granted to ESKOM by
NERSA, and the recent implementation of loadshedding throughout the country. The owners have so
far gathered the following information as part of the evaluation of the investment:
1. All the cash flows (including all the relevant taxes) occur at the end of the related financial year,
except for the initial capital outlay, which occurs at the beginning of the year.
2. The new plant will be built on the piece of land near where the current plant is located, which will
be acquired for R1 000 000. The related property rates and taxes are estimated at R60 000 per annum
and will increase at 6% annually.
3. In line with the requirements of the environmental laws, the company must conduct an
environmental assessment study before the commencement of the construction of the plant, at a cost of
R200 000. If relevant, these costs are not capitalised.
4. The plant will be built at an original cost price of R8 000 000. Delivery and installation of the
various components will cost R2 000 000 (if relevant, these costs are capitalised). The investment will
be funded by a 100% loan at an interest rate of 8% per annum (this is linked to the Repo rate as set by
the South African Reserve Bank (SARB)). The SARB recently kept the Repo rate, and it is expected
that the rate may start increasing in the future. The capital amount is repayable at the end of the term,
and the related interest expense is repayable annually in arrears.
5. The investment in working capital is estimated at R300 000 in year one; and R400 000 in year two.
There will be no investment in working capital in year three.
6. . The plant will generate operating profit before interest but after depreciation as follows: Year 1:
R3 000 000
Year 2: 50% increase from year one. Year 3: 80% increase from year one.
7. The plant will be sold at the end of year three (3) at an estimated selling price of R5 000 000.
Depreciation is provided on a straight-line basis at 10% per annum. The South African Revenue
Service will grant annual capital allowances over the useful life of the plant at 20% per annum.
8. The current company taxation rate is 27%.
9. The minimum required after-tax return on capital projects of this nature is 12%.
A) Identify and briefly discuss seven (7) economic, environmental, ethical, social, and
governance factors that are evident from the given scenario that ST should consider that may
affect its operations.
B) From a quantitative perspective only, comment on whether ST should invest in the new solar
geyser facility or not.
▪ Detailed Net Present Value calculation; and Comment/conclusion.
Question 4
PPC Limited (“PPC”) is a Johannesburg Stock Exchange-listed company that supplies construction
materials and solutions in Southern Africa. The company has over 11 cement factories across SADC
countries. Despite the slow growth in commercial construction activities, the company experienced
revenue growth, mainly driven by demand from residential customers. However, the executive
management remains concerned by electricity price increases, which are a significant component of
the cost of sales.
PPC operates for 300 days in a year and has a 31st of March financial year-end. The following
financial statements of PPC are provided to you:
A) Calculate the Cost of sales growth rate ratio for PPC for the year ended 31 March 2025.
Briefly discuss the change in this ratio using the information given in the scenario.
B) Calculate and comment on the following ratios for PPC for the financial years ended 31
March 2024 and 2025:
(i) Operating Profit Margin
(ii) Interest Coverage Ratio
(iii) Current Ratio
(iv) Cash Ratio
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