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hi just need the help with 3.3, 3.4, 3.5 please thanks Required: Advise Lilly if she will be able to repay her fat Question 3
hi just need the help with 3.3, 3.4, 3.5 please thanks
Required: Advise Lilly if she will be able to repay her fat Question 3 (40) buy new equipment of RSD 000. Their application to finance the equipment at a dou are the servor accountant at fun and Co (Pty) Ltd. The company needs to fixed interest rate of 95% through Finance Bank Ltd was approved The finance team needs to present this application to the board of directors. The financial manager asked your assistance with the calculation of the company's WACC. You have to show them what the effect of this new machine will be on the company's weighted average cost of capital. The following information was extracted from the financial statements: 2022 R400 000 Equity Ordinary share capital (1 000 shares) R250 000 Non-current liabilities Long-term loan Additional Information: Dividends of R50 per share will be declared in 2023, increasing by 20% in 2024. The board of directors expects dividends to be R85 per share in the 2025 financial year, after which it will grow at a fixed rate of 7% per year. Shareholders of the ordinary shares expect a return of 15% on their investment. Similar long-term loans have a yield to maturity of 10.5% per annum. The income tax rate is 30%. . (12) (12) (3) 3.2 Required: 3.1 constant growth Using Gordan's variable growth method, calculate the value of the ordinary shares. Using only the extraction from the financial statements, calculate the current weighted average cost of capital (WACC) for the company. 3.3 Calculate the current break-even point for the long-term loans 3.4 Calculate the WACC of the company when the additional financing of the machine is included in the capital structure. .5 Based on your calculations above, explain why you think the WACC increased/decreased when the additional funding of the new machine has been included. (11) (2)Step by Step Solution
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