• BMLLtd. must evaluate the following two projects and decide which project to undertake during the second half of 2024. As a member of the financial management team, you are instructed to assist in the capital budgeting process by analysing the financial viability of both projects. So far, your team compiled the following projected cash flows for both projects:

Project 1 is a 14-year project with the following projected cash flows:

Year	Cashflows	Project 1
0	Initial investment	-R15,330,000
1	Net Operating cashflows	-R14,716,800
2	Net Operating cashflows	R3,679,200
3	Net Operating cashflows	R3,495,240
4	Net Operating cashflows	R4,019,526
5	Net Operating cashflows	R4,622,455
6	Net Operating cashflows	R5,315,823
7	Net Operating cashflows	R6,113,197
8	Net Operating cashflows	R7,030,176
9	Net Operating cashflows	R8,084,703
10	Net Operating cashflows	R9,297,408
11	Net Operating cashflows	R10,692,019
12	Net Operating cashflows	R12,295,822
13	Net Operating cashflows	R14,140,195
14	Net Operating cashflows	R16,261,225

Project 2 is an 18-year project with the following projected cash flows:

Year	Cashflows	Project 2
0	Initial investment	-R9 102 188
1	Net Operating cashflows	-R7 463 794
2	Net Operating cashflows	-R6 045 673
3	Net Operating cashflows	-R4 292 428
4	Net Operating cashflows	-R2 918 851
5	Net Operating cashflows	R5 233 758
6	Net Operating cashflows	R5 757 134
7	Net Operating cashflows	R6 332 847
8	Net Operating cashflows	R6 966 132
9	Net Operating cashflows	R7 662 745
10	Net Operating cashflows	R8 429 019
11	Net Operating cashflows	R9 271 921
12	Net Operating cashflows	R10 199 113
13	Net Operating cashflows	R11 219 025
14	Net Operating cashflows	R12 340 927
15	Net Operating cashflows	R13 575 020
16	Net Operating cashflows	R14 932 522
17	Net Operating cashflows	R16 425 774
18	Net Operating cashflows	R18 068 351

Both projects are expected to have aterminal cash flow equal to4.5% of the initial investment. Terminal cash flows must still be added to the last projected cash flow.

• BML Ltd. can only afford to undertake one of these projects and the funds required for the project will have to be obtained with long-term financing (i.e., long-term loans, ordinary shares and preference shares).
• BML Ltd. will maintain the current long-term capital structure weights (based on book values of long-term capital sources in the June 2024 balance sheet) for the foreseeable future. Accordingly, the current book value weights must be used for WACCcalculations.
• The ordinary share dividend history is as follows and can be used to estimate the cost of ordinary shares (k_s) by using the Gordon constant-growth (DDM) model:

	Dividend History
2017	2018	2019	2020	2021	2022	2023	2024
R0.04	R0.04	R0.05	R0.06	R0.06	R0.07	R0.08	R0.08

• BML Ltd. has a Beta coefficient () of 1.25. The current risk-free rate (R_f) is 7.25% and the expected market rate of return on all assets (k_m) is 13.25%. This information can be used to estimate the cost of ordinary shares (k_s) by using the Capital Asset Pricing Model (CAPM).
• The financial statements for the financial year ending 30 June 2024 are as follows:
  1. Calculate the percentage weight that the sources of long-term financing made up of total long-term financing during 2024

	Capital Structure: Sources of Financing	% Weight of Long-term Financing
		Weight 2024
1	Long-term Debentures	___%
2	Long-term Bonds	___%
3	Ordinary Shares and reserves	___%
4	Preference Shares	___%
	Totallong-term financing	100%