3.4. Briefly explain, with calculations, what happens to average cost of capital of ClearCut Ltd. if it sells R3 million of additional equity (at par) to retire R3 million of outstanding debt? (5)

Question 4 [30 Marks] An investor is examining the profitability of multinational companies with large shares of the global high-tech market, Company X, Y and Z. Company X is a conglomerate with varied product lines from computer chip to large robotic equipment. Company Y has pursued a strategy of selling its products at affordable prices. However, Company Z aims to achieve higher selling prices by emphasizing on the high-tech engineered quality products for business use. Company X reports in Japanese yen (JP), Company Y reports in South African Rand (ZAR), and Company Z reports in US dollars (US$). The investor collects the data shown below: COMPANY X JP Millions 2015 2016 2017 2018 2019 Revenue 6 343 506 7 116 350 7 665 332 6 654 518 6 381 599 Gross profit 1 683 711 1 804 171 1 908 729 1 288 431 1 459 362 Net income (Loss) 78 186 137 429 127 413 (343 559) (19 743) COMPANY Y ZAR Millions 2015 2016 2017 2018 2019 Revenue 152 722 168 435 221 849 262 279 275 583 Gross profit 16 382 18 327 22 767 27 504 28 005 Net income (Loss) 4 070 4 906 6 222 5 638 5 451 COMPANY Z US$ Millions 2015 2016 2017 2018 2019 Revenue 13 276 14 590 16 352 14 901 16 605 Gross profit 1 858 2 037 2 450 1 834 1 790 Net income (Loss) 22 161 484 (226) 129 Use the information above to answer the following questions:

4.1 Explain in detail which of the three companies is largest based on the amount of revenue, in US$, reported in fiscal year 2019? For fiscal year 2019, assume the relevant, average exchange rates were 15.46 ZAR/US$ and 92.5 JP/US$. (8)

4.2 Briefly explain and show with calculations which company had the highest revenue growth from fiscal year 2015 to fiscal year 2019? (10)

4.3 Discuss how do these three companies compare, based on profitability? (12