MediPharm Ltd has optimal capital structure weights of 40% debt and 60% equity. MediPharm is in the 30% tax bracket and is evaluating four independent investment proposals. PROJECT INITIAL INVESTMENT A B C D (R) 100 000 200 000 125 000 100 000 INTERNAL RATE OF RETURN (IRR) (%) 17 15 14 11 MediPharm senior financial analyst has gathered the following information: MediPharm can raise R150 000 through the sale of a R1 000 par value, 8% annual coupon rate and a ten-year debenture. The debenture will be issued at 5% discount and R20 flotation cost per debenture. Additional funds will be raised through the bank loan with an after-tax cost of 10%. R375 000 is available through retained earnings. Additional funds will be raised through the issue of new ordinary shares. The company pays a regular dividend of R10, has a growth rate of 3% and nets R87.30 after flotation costs. The flotation costs are calculated at 3% of the par value (R90) of a share. REQUIRED: 1.1 Calculate the WACC associated with each range of financing/break-point. (18 marks) 1.2 In which project do you recommend that the company invest its funds? Give motivation for your choice. (2 marks)