ent of the May and poses of redit redit nce are ts 5.1. 5.2. Year 1 2 3 4 5 . Question 5 [27] a computer-operated conveyor-belt system. Joseph, the factory manager, identified Conbuild (Pty) Ltd needs to replace one of the conveyor-belt systems in its factory with such a system and prepared the following information for Conbuild's management to consider: Source of capital Ordinary shares issued 16% preference shares Long-term loan Additional information: expect a 25% return. The company has issued 2 000 000 ordinary shares and the share The company has to repay the long-term loan at the end of 8 years and th The preference shares are irredeemable and are currently trading at 18%. interest rate on the loan is 20%. . R 6 000 000 2 500 000 1 800 000 10 300 000 . The tax rate is 30%. Required Use the information provided to calculate the weighted average cost of capital (WACC) for the company. Round WACC off to nearest percentage. Cash flows 140 000 120 000 95 000 70 000 50 000 The initial required investment is R325 000 and the company's cost of capital is 13%. Joseph calculated the net present value (NPV) of the investment at 13% as R28 755. The financial manager, however, requested that Joseph also calculate the internal rate financial manager instructed Joseph to include 18% as an alternative cost of capital for of return (IRR) for this project before tabling the information for decision-making. The his calculations. Required Note: Show all your calculations and round off all calculations to the nearest whole number. FMA 101-FINANCIAL MANAGEMENTI EXAMINATION PAPER-2018 SECOND SE (20) Use the information provided to calculate the internal rate of return (IRR) of this proposed investment. Round IRR off to nearest percentage Should the company invest in this conveyor-belt system based on Joseph's NPV and IRR calculations? Substantiate your answer based on relevant NPV and IRR decision criteria. (7) 1 3 $ 7 UEST LIN 2239 LISB 27 137 i ta 34 19 36 37

Additional information: - The comparyy has issie The compiny has is expect a 25% retum. - The preference shares are iredeemable and are currenty trading - The compary has to repay the long-term loan at the ond of 8 yogery iofer - The tax rate is 30%. Bequired Use the infomation provided to calculate the weighted average cost of WACC) for the sompany, Rewd WACC eff to nearest porcontage, Question 5 [27] Conbulid (Pty) Lid needs to replace one of the conveyor-beit systerns in its factory a computer-operated conveyor-belt system. Joseph, the factory manager, idey w such a system and prepared the following information for Conbuild's managernint io nornsider: The initial required investment is R325 000 and the company's cost of capital is 13%. Joseph calculated the net present value (NPV) of the investment at 13% as R28 755 . The financial manager, however, requesfed that Joseph also calculate the internal rate of retum (IRR) for this project before tabling the information for decision-making. The financial manager instructed Joseph to include 18% as an alternative cost of capital for his caiculations. Required Note: Show all your calculations and round off all calculations to the nearest whole number. 5.1. Use the information provided to calculate the internal rate of return (IRR) of this proposed investment. Round IRR off to nearest percentage 5.2. Should the company invest in this conveyor-belt system based on Joseph's (20) NPV and IRR calculations? Substantiate your answer based on relevant NPV and IRR decision criteria. (7)