QUESTION 1 [17 MARKS] a) Amandla (Pty) Ltd is implementing a project to enhance the companys performance. The project investment cost is R40 000. The project will result in cash flows of R16 000 in year one, R22 000 in year two, R21 000 in year three and R5 000 in year five. The Weighted Cost of Capital (WACC) is 8%. Determine the Net Present Value (NPV). (5 marks)

b) XYZ (Pty) Ltd a supplier of fitness equipment is trying to decide whether to undertake any or all of the projects proposed in its investment opportunities. The company intends to invest up to R100 000. Using the Net Present Value (NPV) for each project, which, if any of the available projects would you recommend that XYZ (Pty) Ltd should accept and why? .

Investment: A. 100 000, B. 90 000, C. 80 000

NPV index (NPVI) A. 1.09, B. 1.15, C. 0.97

NPV

(c) PLEASE COMPLETE THE STATEMENT BELOW: i. .. is a customized option created specifically for the party wanting to hedge in a particular currency, for an exact settlement date and exact amount of foreign currency as needed by the hedging party. (2 marks) ii. . is a right to buy a certain asset by a certain date for a certain price. (2 marks) iii. . is a right to sell a certain asset by a certain date for a certain price. (2 marks) iv. . is a standardized contract which allows the parties to contract to buy or sell a fixed amount of foreign currency at a fixed rate in future. (2 marks)