Question $3$

$(5$ marks$)$

Toppies Limited is entering the Namibian market. They have decided to test the market with one of the most popular products. They do not know what price to charge at the intial launch of the product. The following data is available:

$\backslash$table$[[$Units demanded,Selling price per unit $($N$$),\backslash$table$[[$Variable Cost per unit$],[($N$$)]]],[1000,72,36],[1100,69,32],[1200,68,30],[1300,63,29]]$

$\backslash$table$[[$REQUIRED$,$Marks$],[3\mathrm{.}1,\backslash$table$[[$Help Toppies to determine the price that should be charged for the new$],[$product in order to maximize profits$]],5],[$Total for question $3,5,]]$

Question $4$

$(22$ marks$)$

QBR plans to produce Product $x$ as part of a new project undertaking. The anticipated figures for units sold, units produced, and the market price of Product X during its projected four$-$year lifespan are outlined as follows:

$\backslash$table$[[$Year$,1,2,3,4],[$Sales and production $($units$),150000,70000,60000,60000],[$Selling price $($N$ per unit$),25,24,23,22]]$

The following information for Product X for the first year of production is available

$\backslash$table$[[,$N$$],[$Direct material cost,$5\mathrm{.}40$ per unit$],[$Other variable production cost,$6\mathrm{.}00$ per unit$],[$Fixed costs,$4\mathrm{.}00$ per unit$]]$

To boost demand, planned advertising expenditure is estimated at N$$650000$ during the initial year of production, decreasing to N$$100000$ in the second year. No advertising spend is anticipated for the third and fourth years. The fixed costs relate solely to additional cash$-$based fixed production

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overheads, with the per$-$unit fixed cost calculated on an assumed standard output of $150000$ units. There will be no adjustment for any over$-$ or under$-$recovery of these fixed costs.

Manufacturing of Product X will take place using a newly acquired production machine valued at N$$800000.$ While the machine's operational life is expected to extend to approximately ten years, existing government regulations permit the capital expenditure to be written off solely against the output of this specific product. Consequently, capital allowances will be applied on a straight$-$line basis across four years.

Corporate profits are taxed at an annual rate of $30\%,$ with the tax obligation settled in the same financial year i

Question $3$

$(5$ marks$)$

Toppies Limited is entering the Namibian market. They have decided to test the market with one of the most popular products. They do not know what price to charge at the intial launch of the product. The following data is available:

$\backslash$table$[[$Units demanded,Selling price per unit $($N$$),\backslash$table$[[$Variable Cost per unit$],[($N$$)]]],[1000,72,36],[1100,69,32],[1200,68,30],[1300,63,29]]$

$\backslash$table$[[$REQUIRED$,$Marks$],[3\mathrm{.}1,\backslash$table$[[$Help Toppies to determine the price that should be charged for the new$],[$product in order to maximize profits$]],5],[$Total for question $3,5,]]$

Question $4$

$(22$ marks$)$

QBR plans to produce Product $x$ as part of a new project undertaking. The anticipated figures for units sold, units produced, and the market price of Product X during its projected four$-$year lifespan are outlined as follows:

$\backslash$table$[[$Year$,1,2,3,4],[$Sales and production $($units$),150000,70000,60000,60000],[$Selling price $($N$ per unit$),25,24,23,22]]$

The following information for Product X for the first year of production is available

$\backslash$table$[[,$N$$],[$Direct material cost,$5\mathrm{.}40$ per unit$],[$Other variable production cost,$6\mathrm{.}00$ per unit$],[$Fixed costs,$4\mathrm{.}00$ per unit$]]$

To boost demand, planned advertising expenditure is estimated at N$$650000$ during the initial year of production, decreasing to N$$100000$ in the second year. No advertising spend is anticipated for the third and fourth years. The fixed costs relate solely to additional cash$-$based fixed production

overheads, with the per$-$unit fixed cost calculated on an assumed standard output of $150000$ units. There will be no adjustment for any over$-$ or under$-$recovery of these fixed costs.

Manufacturing of Product X will take place using a newly acquired production machine valued at N$$800000.$ While the machine's operational life is expected to extend to approximately ten years, existing government regulations permit the capital expenditure to be written off solely against the output of this specific product. Consequently, capital allowances will be applied on a straight$-$line basis across four years.

Corporate profits are taxed at an annual rate of $30\%,$ with the tax obligation settled in the same financial year it is incurred. For evaluating new capital projects, the company applies a post$-$tax discount rate of $10\%.$ Inflation effects are to be disregarded.

$\backslash$table$[[$REQUIRED:$,$Marks$],[4\mathrm{.}1,$Evaluate the proposed investment using the Net present value $($NPV$)$ technique.,$15],[4\mathrm{.}2,$Evaluate the proposed investment using the Internal Rate of Return at $20\%$ cost of capital.,$5],[4\mathrm{.}3,$Explain why NPV and IRR may give conflicting results when comparing two mutually exclusive projects,$2],[$Total for Question $4,22]]$