4. Finance: 20 marks (a) WACC calculation and interpretation (i) The table below shows the existing capital structure (at market value) and its corresponding after-tax costs for Mitre Company. You are employed as an accountant of Mitre Company. Calculate the Weighted Average Cost of Capital (WACC) for the existing capital structure. (Round your percentage answer to two decimal places) After-tax cost Non-current liabilities $1,500,000 10% ordinary shareholders equity $1,000,000 12% (2 marks) (ii) Explain how this rate can be used to evaluate any proposed investment projects. (2 marks - Maximum of 40 words) (b) The directors of Maureen Company are considering two mutually exclusive investment projects. Both projects concern the purchase of a new plant. The following data are available for each project (Project Ivy and Project Sylvia): \" Purchase cost of a plant (immediate outlay) $-75,000 $-55,000 Expected annual net operating cash flow: _ Year 1 $27,000 $12,000 Year 2 $27,000 $24,000 Year 3 $27,000 $36,000 Estimated residual value at the end of year 3 $24,000 $10,000 Required: For each project calculate: (i) The payback period and express it in years and months, assuming the net operating cash ows occur uniformly during the year and the residual values occur at the end of year 3. (4 marks) (ii) The net present value, assuming all annual operating cash flows occur at the end of each year and the weighted average cost of capital is 10%. (Round to the nearest dollar). (10 marks) (iii) State which of the two investment projects the directors of Maureen Company should select. Justify your answer using your calculations from (i) and (ii). (2 marks - Maximum of 40 words)