Assess if the capital injection created value for the company.

Your company requires a capital injection of R10 million for equipment replacement and working capital. The investment is required over a period of 4 years. Use the current financial statements of your company to estimate the cash flows. It is expected that your company will grow at 10% for the next 4 years. Beyond 4 years after capital injection, it is expected that the company will grow at constant rate of 4% for the foreseeable future.

Therefore, continuing value should also be taken into consideration when performing valuation.

Assume the following:

• rps = 9%; rd =10%; T =25%
• rRF = 5.6%; RPM = 6%; b = 1.2
• Debt: Price of the bond = R1,153.72; no of bonds = 70,000 bonds
• Preferred shares: Price = R116.95; no of shares = 200,000 shares
• Ordinary shares (common): Price = R50.000; no of shares = 3 million shares