MAC2602 Assignment 1 2026
DUE 15 APRIL 2026
PART A
KT Beverages Ltd (“KT”) manufactures and distributes Kombucha (a naturally fermented
green tea drink) in several variants and other locally known organic juices from its
Polokwane Facility, in the Limpopo Province. The province has a high unemployment
rate and low household income.
(A1) Identify and briefly discuss eight economic, social, environmental, and governance
factors that can affect the operations of KT, which are evident from the information given
in the scenario.
Factor type Factor Brief discussion
Economic High unemployment High unemployment reduces household income
rate in Limpopo lower demand for KT’s products (organic juices are
relatively expensive). (Study guide Part 1, SU3 -
external environment, economic factors)
Economic Low household Low disposable income forces consumers to choose
income cheaper substitutes, affecting sales and profitability.
(Study guide, SU3, p.33 economic environment)
Social Promotion of Positive social trend - increased health awareness
healthier organic boosts demand for Kombucha and organic juices.
drinks by Sales (Study guide 3, p.33 - social environment; also
Team Lesson 1, slide on social factors)
Social Late payment by Relational risk - late payments strain cash flow and
major customers increase bad debt risk. (Study guide, SU2, p.27 -
stakeholder conflicts; also working capital
management, SU17)
, Environmental Chronic water Water is essential for manufacturing; unreliable
supply challenges supply disrupts production and increases costs.
(Study guide, SU3, p.33 - social/environmental; also
risk management, SU24, environmental risk)
Environmental Environmental Compliance cost (R150 000) and potential delays;
assessment study ensures sustainable practices but adds upfront
required expense. (Study guide, Part 4, SU22–SU28 - risk
management, compliance risk)
Governance ISO compliance Cost of R200 000 to meet international standards;
requirement non-compliance would prevent operations, but
improves quality and market access. (SG, SU23 -
components of risk management programme,
control activities)
Governance Financing solely by Reliance on debt increases financial risk (interest
long-term loan (10% and capital repayments) but avoids dilution of
interest) ownership. (SG, SU12 – capital structure, financial
leverage effect)
(A2) Quantitative evaluation – Net Present Value (NPV) and recommendation (22 marks)
Reference for NPV method: SG, SU21 – Discounted cash flow methods, pp.115-121; also
Lesson 8 (Capital investments) slides.
Initial outlay (Year 0):
Land opportunity cost (forgone sale) = R2 000 000 (SG, SU19, p.104 – opportunity cost)
Environmental assessment study (not capitalised) = R150 000
ISO compliance cost (not capitalised) = R200 000
Building & machinery cost = R10 000 000 (capitalised)
DUE 15 APRIL 2026
PART A
KT Beverages Ltd (“KT”) manufactures and distributes Kombucha (a naturally fermented
green tea drink) in several variants and other locally known organic juices from its
Polokwane Facility, in the Limpopo Province. The province has a high unemployment
rate and low household income.
(A1) Identify and briefly discuss eight economic, social, environmental, and governance
factors that can affect the operations of KT, which are evident from the information given
in the scenario.
Factor type Factor Brief discussion
Economic High unemployment High unemployment reduces household income
rate in Limpopo lower demand for KT’s products (organic juices are
relatively expensive). (Study guide Part 1, SU3 -
external environment, economic factors)
Economic Low household Low disposable income forces consumers to choose
income cheaper substitutes, affecting sales and profitability.
(Study guide, SU3, p.33 economic environment)
Social Promotion of Positive social trend - increased health awareness
healthier organic boosts demand for Kombucha and organic juices.
drinks by Sales (Study guide 3, p.33 - social environment; also
Team Lesson 1, slide on social factors)
Social Late payment by Relational risk - late payments strain cash flow and
major customers increase bad debt risk. (Study guide, SU2, p.27 -
stakeholder conflicts; also working capital
management, SU17)
, Environmental Chronic water Water is essential for manufacturing; unreliable
supply challenges supply disrupts production and increases costs.
(Study guide, SU3, p.33 - social/environmental; also
risk management, SU24, environmental risk)
Environmental Environmental Compliance cost (R150 000) and potential delays;
assessment study ensures sustainable practices but adds upfront
required expense. (Study guide, Part 4, SU22–SU28 - risk
management, compliance risk)
Governance ISO compliance Cost of R200 000 to meet international standards;
requirement non-compliance would prevent operations, but
improves quality and market access. (SG, SU23 -
components of risk management programme,
control activities)
Governance Financing solely by Reliance on debt increases financial risk (interest
long-term loan (10% and capital repayments) but avoids dilution of
interest) ownership. (SG, SU12 – capital structure, financial
leverage effect)
(A2) Quantitative evaluation – Net Present Value (NPV) and recommendation (22 marks)
Reference for NPV method: SG, SU21 – Discounted cash flow methods, pp.115-121; also
Lesson 8 (Capital investments) slides.
Initial outlay (Year 0):
Land opportunity cost (forgone sale) = R2 000 000 (SG, SU19, p.104 – opportunity cost)
Environmental assessment study (not capitalised) = R150 000
ISO compliance cost (not capitalised) = R200 000
Building & machinery cost = R10 000 000 (capitalised)
