a) Calculate and comment on the length of the working capital year by year (assuming 365 days in the year). b) Calculate the appropriate WACC for the company based on the market and on the book values .

Question 2 {20 marks; 36 minutes) Staples logis a company that supplies stationary to the retail sector. The company is well established in the sector, but management is under pressure to improve returns, particularly the company' 5 Return on Equity (ROE). The nance director has calculated the pre-tax cost of nancing for the company as follows: Ordinary share equity 20% Preference shares 9% Long-term loan 14% Debentures 12% The following is also an extract of the audited balance sheet of the company as at 301une 2020 and the last two years. n I; a 2018 2019 2020 Non-current assets Current assets Inventory 125 000 130 000 128 000 Trade receivables 190 000 275 000 310 000 Ordinary shares of R10 each 1 000 000 Retained income 470 000 12% preference shares of R25 each 100 000 1 570 000 Debentures bearing interest at 12% per annum 70000 Long-term loan bearing interest at 14% per annum 200 000 Deferred taxation 60 000 1 900 000 Current liabilities Trade payables 88 000 90 000 120 000 The ordinary shares and preference share currently trade at R2350 and R2650 per share respectively. The long-term loan is repayable after eight years. Current interest rates on similar loans approximate 14% per annum. The current tax rate is 28% The following values relating to cost of sales were provided. 2013 2019 2020 R 0 8 Cost of sales 750 000 950 000 1 100 000 The company policy was to mark up good by 20% of cost