, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
PART A
A1: ESG Factors Affecting KT Beverages Ltd
1. High unemployment rate (Social factor)
Identification: The Limpopo Province has a high unemployment rate.
Discussion: This allows KT to access low-cost labour, but it also reduces consumers’ purchasing
power, which may negatively affect demand for its products.
2. Low household income levels (Economic/Social factor)
Identification: The province is characterised by low household income levels.
Discussion: Consumers may not be able to afford KT’s beverages, leading to reduced sales volumes
and slower revenue growth.
3. Water supply challenges (Environmental factor)
Identification: The local municipality experiences chronic water supply problems.
Discussion: Water shortages disrupt production processes and increase operational risk, as beverage
manufacturing depends heavily on water.
4. Reliance on foreign supplier (Economic factor)
Identification: KT depends on a plastic bottle supplier based in China.
Discussion: This exposes the company to exchange rate fluctuations, import costs, and supply chain
disruptions, affecting production stability.
, 5. Use of plastic bottles (Environmental factor)
Identification: KT packages its products in plastic bottles.
Discussion: This contributes to environmental pollution and may result in stricter environmental
regulations and increased compliance costs.
6. Environmental compliance requirements (Governance factor)
Identification: KT must conduct an environmental impact assessment before building the facility.
Discussion: This increases costs and reflects the need to comply with environmental laws and
regulatory frameworks.
7. ISO certification requirements (Governance factor)
Identification: The facility must comply with ISO standards before operations begin.
Discussion: While ensuring quality and safety, compliance increases setup costs and operational
complexity.
8. High credit sales (Economic factor)
Identification: 40% of KT’s sales are made on credit.
Discussion: This increases the risk of bad debts and may create cash flow constraints, affecting
liquidity.
A2: Net Present Value (NPV) Calculation
Step 1: Initial Investment (Year 0)
Item Amount (R)
PART A
A1: ESG Factors Affecting KT Beverages Ltd
1. High unemployment rate (Social factor)
Identification: The Limpopo Province has a high unemployment rate.
Discussion: This allows KT to access low-cost labour, but it also reduces consumers’ purchasing
power, which may negatively affect demand for its products.
2. Low household income levels (Economic/Social factor)
Identification: The province is characterised by low household income levels.
Discussion: Consumers may not be able to afford KT’s beverages, leading to reduced sales volumes
and slower revenue growth.
3. Water supply challenges (Environmental factor)
Identification: The local municipality experiences chronic water supply problems.
Discussion: Water shortages disrupt production processes and increase operational risk, as beverage
manufacturing depends heavily on water.
4. Reliance on foreign supplier (Economic factor)
Identification: KT depends on a plastic bottle supplier based in China.
Discussion: This exposes the company to exchange rate fluctuations, import costs, and supply chain
disruptions, affecting production stability.
, 5. Use of plastic bottles (Environmental factor)
Identification: KT packages its products in plastic bottles.
Discussion: This contributes to environmental pollution and may result in stricter environmental
regulations and increased compliance costs.
6. Environmental compliance requirements (Governance factor)
Identification: KT must conduct an environmental impact assessment before building the facility.
Discussion: This increases costs and reflects the need to comply with environmental laws and
regulatory frameworks.
7. ISO certification requirements (Governance factor)
Identification: The facility must comply with ISO standards before operations begin.
Discussion: While ensuring quality and safety, compliance increases setup costs and operational
complexity.
8. High credit sales (Economic factor)
Identification: 40% of KT’s sales are made on credit.
Discussion: This increases the risk of bad debts and may create cash flow constraints, affecting
liquidity.
A2: Net Present Value (NPV) Calculation
Step 1: Initial Investment (Year 0)
Item Amount (R)
