Additional Information: - The bonds are set to mature 5 years from now and the bondholders require a 12.743% return. - The company pays 30% corporate tax rate. - The irredeemable preference shares are trading at par. - The entity has just declared an ordinary dividend of $1.20 per share. This is expected to grow at 20% per annum in the next two years whilst the growth rate is expected to decrease to 8% per annum thereafter, forever. Ordinary shareholders require a 15% rate of return. REQUIRED (a) Calculate, using market valuation weights, the current WACC. [8 marks] The Proposed Major Leather Manufacturing Project . F Limited intends to raise a total of $2 million from two sources of capital, debentures and bank loan, as follows: Debentures $1.2 million worth of net proceeds from 11% Irredeemable Debentures at a 20% discount. Bank Loan \$0.8 million worth of 12% bank loan. Please Note: The effect of the above two funding options is to trigger a rise in the cost of equity by 41/4 percentage points due to the higher perceived financial risk expected to arise due to the resultant capital structure alterations. Assume no change to the value of equity. No other cost or value of existing sources of capital will be affected. REQUIRED: (b) Calculate, using market valuation weights; CS CamScanner (i) The revised WACC incorporating the new proposed financing arrangement. [7 marks] (ii) The Marginal WACC (MWACC). [6 marks] (c) Which discount rate (WACC or MWACC) is appropriate for the evaluation of the proposed leather manufacturing project and briefly explain three reasons why. [4 marks]