Phakoe (Pty) Limited is a company that is engaged in the producing of alcoholic beverages in Lesotho and Swaziland. The

[answerhappygod]

Phakoe Pty Limited Is A Company That Is Engaged In The Producing Of Alcoholic Beverages In Lesotho And Swaziland The 1 (59.05 KiB) Viewed 49 times

Phakoe Pty Limited Is A Company That Is Engaged In The Producing Of Alcoholic Beverages In Lesotho And Swaziland The 2 (24.07 KiB) Viewed 49 times

Phakoe (Pty) Limited is a company that is engaged in the producing of alcoholic beverages in Lesotho and Swaziland. The company's performance for the past two years is as follows: Summarised Income Statement of Phakoe (Pty) Limited for the year ended 31 March: Revenue Pre-tax accounting profit* Taxation Profit after tax Dividends Retained earnings Non-current Net current assets Financed by: Shareholders' funds Medium-and long-term bank loans Capital employed Statement of financial position (extracts) as at 31 March: 2017 Other information: (i) (ii) (iii) (iv) 2017 M'm (v) 760 168 (vi) (vii) (58) 110 (34) 76 M'm 320 342 662 450 212 662 2016 M'm *After deduction of the economic depreciation of the company's non-current assets. This is different from the depreciation used for tax purposes. 640 133 (46) 87 (31) 56 2016 M'm 290 306 596 400 196 596 The capital employed at the end of 2015 was M580 million. The provision for doubtful was M11 million at 1 April 2016 and decreased to MS million at 31 March 2017 Phakoe had non-capitalised leases valued at M15 million both in 2016 and M2017. The company's pre-tax cost of debt was estimated to be 10 per cent in 2016, and 9 per cent in 2017. The company's cost of equity was estimated to be 13% per cent in 2016 and 15 per cent in 2017. The target capital structure is 65% equity, and 35% per cent debt in both years The effective rate of taxation was 35% in both 2016 and 2017.

(viii) Economic depreciation was M42 million in 2016 and M38 million in 2017. (ix) Historical depreciation was M58 in 2016 million and M64 in 2017 Other non-cash expenses were M18 million per year in both 2016 and 2017. (x) (xi) Interest payable was M8 million in 2016 and M10 million in 2017. Required: (a) Estimate the economic valued (EVA) for Phakoe (Pty) Limited for both 2015 and 2017. State clearly any assumptions that you make. (21 marks) (b) State and explain one advantage, and disadvantage each of Economic Value Added (4marks) (Total marks = 25)