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I need the theoretical answers based on the calculations to a finance case study. Please find the case study and the excel sheet with the calculations below. Thank you!

Case Description: 1'r"ou are the CFD of dust Defence Supplies Inc a mature publicly listed ustralian rm supplying low technology products for use in the defence forces, and to the camping and hiking leisure nrarket. The business has several divisions based around Brisbane, with Their head ofces in South Brisbane. The last annual report and mariret data provides the fhllowing infomiation regarding the nancial structure of the oompmy. The liabilities of Amt Defence Supplies include: I 1,||'.l unsecured notes on issue, and an 3% coupon rate paid semi-annually. The notes matm'e in 11 years, andthe curreuttradiugpriceonthe note isS'J'SlJ, the facevalue ofthe notesis $1,001]. I so] debentures which mature in S years, and have a current market price ofSl,115. The debentures have a face value of$l,ll and pay a coupon of$1 10 once a year. I 2,500 issued shares of preferred stock, with current mariret price of 591.51] and paying a dividend ofSlEJ I l ordinary shares with a current market price is $53.15. The compmy has piclred up some contracts over the last few years, with growth in earnings, averaging 10.2 per cent per year. It is expected with current opportunities that this might continue for two nmre years, but then slow to 3 or 4%. The compmy directors havejust declared a dividend of $4.34 per share for the last 12 months. The Reserve Bank has suggested that ination rates are expected to be stable at about 1%. The company tart. rate faced by Aust Defence Supplies is 215%. Problems: Part 1: IS marks] What is the cost ofcapital ofust Capital Supplies? Part 1: III] marks] 1'r"ou have received a condential envelope. It contains a draft ofa competitive bid notification for a contract to supply duffel canvas to the Australian Navy. The cover memo 'om Aust Defence Supplies' CEDDmdd Sharpe asksyouto review thebidbeforeitis submitted. The bid and its supporting documents have been prepared by Aust Defence Supplill' sales staff. It calls for Aust Defence Supplies to supply lll,ll metres ofduffel canvas per year for 5 years. The proposed selling price is xed at 53!] per metres. 1|r"ou are not usually involved in sales, but 'dris bid was unusual in a few ways. First, if accepted by 'dre navy, it would commit Aust Defence Supplies to a xed-prioe, long-term contract. Second, producing the duel canvas would require an investment ofSl.5 million to purchase machinery and to refurbish mist Defence Supplies' small buildingl'plant at the Port oerisbane. You have also collected over the last week the following facts: I Theplantatthe Port ofBrisbane hadbeenbuiltinthemid l'Ellls andis nowidle, asthe company had refocussed on providing higher value add products. The plant is fullyr depreciated on Aust Defence Supplies' books, except for the purchase cost ofthe land {in 1962] of Sillll. l Reengnisingthatthelandwasvaluableshore'ontproperty,ynuthinltthelandandtheidle plant eould be sold, inunediately or in the near rture, for Eli-illitil. I Refurbishing the plant would oost l}. It would be expensed with a depreciation life of 1|] years. I The new nrachinery would cost $1 million.. I The rethrhished plant and new nrachinery would last for nrany years. However, the remaining market for duffel canvas is snrall, and it was not clear that additional orders could be obtained oncethe navycontractis nished The machinerywill be custom-builtandcan beused only for duffel canvas. Its second-hand value at the end ot'5 years is probably zero. I Mr Sharpe thought that working capital would average about 10 peroent of sales. I Men'essoldandpriceper metrewouldbexedhythe duration ofthe contract. I Cost of goods includes xed cost of $300,000 per year plus variable costs of 513 per metre. Costs are expected to increase at the ination rate. I Depreciation: A $1 million investorent in nrachinery is depreciable straight-line over 5 years [5203," per year]. The Si cost of refurbishing the Port of Erisbm plant is depreciahle straight-line over l years. A second envelope has also arrived 'om the company's Business Development Manager {Liping Xian]. It contains what his Xian described as a rm offer from a real estate developer to purchase the Port ofErisbane land and plant for 51.5 million in cash but you have noticed that the offer was subject to Council approval for development ofthe land as watertiont {or close to} apm'lments. Should you recommend submitting the bid for this competitive tender to the Navy at the proposed price of 530 per metre, or make a counter offer? Comment on critical issues to he considered, including the offer from the real estate developer. Given the nattn'e of the sales eontract with the Navy, the sales aspect is low risk and thereihre it is considered that the diseotmt rate could he 2% below the company dist of capital. Part 3: I'i' marks] The company has an existing operation making portable utensils and products for mobile use and currently uses an injection moulding machine that was purchased two years ago. This machine is being depreciated on straight line basis over eight years; it has six years of remaining life, and its current book value is HEEEHJD. The machine currently onuldbe sold for Hll. A replacement machine can be purchased that has a cost of$1,2l]l,t]l, an estimated useful life ofsix years, and an estimated salvage value of $153,003. This machine can be depreciated for tax purposes over a ve- year straight-line schedule. The division manager expects, but is not strongly oertain that the replacement machine would permit an output expansion of 1 1,501] units in the rst year, 12,500 Imits in the second year and 14,0110 thereafter 'om the ctn'rent output of 111331] tmits - and you can sell allyoumalreatthe currentpriceofl perunit. Evenso, one ot'thebig advantagesot'the machineis its greater operating efciency. Again, without great eertainty, the managing director expects to save $1.25 per unit in current dollars ofl'the current operating costs over the longer term, but in re t'ust year the saving would only be 5.75 per unit {while the workers learn to use the machine]. The new machine would require inventories to be increased by ll}, but aocounts payable would sinadtaneously increase by Hill. Asyou are theCFD, you are requiredto determinewhetherthecompanyshouldtmdertake the replacement? Given re uncertainty you are also required to provide insight into how the uncertain factors impact on your recommendation. ""1 ---- 2? 50% Gust ef ca Iiel 10 TN Current ellln - -' Current beekvalue 430.01!!! Hema'mi .- useful life _ _ .l_-'I "T _ _Z_EE-E-E-E-E _ - 241-500 262-5" 294-000 294-000 294-01!!! 14.09:: 191330 225 291-.EIIID 129.950 DEGREE in variable 1315': 133370 503.95" 535.450 555.95" 593.45" II'ICI'BESE in demjam 1154.01!!!) 1154.01!!!) 1154mm) 1 154.0111!) { 154.01!!!) Increase in net I: -ral:| ,- a 1 'l 2?]..37D 412.45ll .EEEI 595.95!) mm Tax on haease In net npetat'rlg pre: ("'53-'71 {113-415} {139-743} {139-455} {143-953} H3350 {199.331} Increase inneturati .- . 13mm: 195.243 299.012 m 390.362 mm" 15"" "mm-em 524.549 Intrease in annual aeee cash Home HEB-1'43 453-012 :'EEIEEEI - 524.549 Purcha5e east of replacema'lt macrine {1.21m MD II'WEhnentinwnrkl Ica'rl 20!]. MD Preeeeds fmrn sale of replaeed mad'line, aner 13x 151.500 Illllhl net 'I'Ivestn'lenl: 1. 24B ACID Preeeedsfrmthh-lnfre ammtmdine aertax Hemverrofmrkhg ema- Terminal esh ew - 103.?50 znnmu 303350 833.599 ""1"" "m" ""3"" 35"" "5"" mm Met resent value m Internal fete Bf return 3!] 51% - Depreciam of replaced machine 36.0"! 86.0"! SEEM SEEM 36.001 - - - heement madli'le 24mm": HELENE ammo 24:13:11: RELIED