Financing the Project

The total cost of the project is $R20$ million. The financial manager is

contemplating funding this project with debt at a projected interest rate of

$9\%.$ The projected cashflow from this expansion is shown in the table on

the left. The company beta is $1\mathrm{.}8,$ the $5-$year SA government bond yield

$($risk$-$free rate$)$ is $6\mathrm{.}5\%,$ the expected market return is $12\%,$ and the current

company tax rate is $27\%.$Calculate the degree of operating leverage $($DOL$)$ and degree of financial leverage $($DFL$)$ for ABC Manufacturing $($Pty$)$ Ltd for the $2023$ financial year