Monate Group Limited (Monate Group) is a South African management group of companies with subsidiaries in the food industry. Monate Group has a footprint in various countries on the African continent. The companys target consumer ranges from a lower to higher end income consumer that is always looking for affordable quality food. Monate Group acquired some large companies in the recent years in order to expand its offering and each store is placed strategically throughout the continent. Statement of Comprehensive Income for the year ended 31 December 2022 R000 Note 2022 2021 Revenue 117 364 000 97 938 000 Cost of sales (75 446 000) (63 542 000) Gross profit 41 918 000 34 396 000 Other operating income 2 904 000 915 000 Distribution expenses (7 060 000) (5 491 000) Other operating expenses (23 640 000) (20 361 000) Operating profit 14 122 000 9 459 000 Net finance costs 1 (3 486 000) (2 624 000) Income from investments 1 781 000 1 238 000 Profit before taxation 12 417 000 8 073 000 Taxation (1 954 000) ( 983 000) Profit for the year 10 463 000 7 090 000 Preference dividend (500 000) (500 000) Ordinary dividend Interim (1 650 000) (259 000) Ordinary dividend Final (668 000) (1 021 000) Retained income for the year 7 645 000 5 310 000 Other information relating to Ordinary shares Issued shares (thousands) 1 900 000 1 820 000 Share price closing (cents) 5 745 3 080 000 MAC3702 ASSIGNMENT 2 Page 12 of 14 [TURNOVER] QUESTION 4 (continued) Statement of Financial Position at 31 December 2022 R000 Note 2022 2021 ASSETS Non-current assets Intangible assets 29 270 000 24 265 000 Property, plant and equipment 92 301 000 86 482 000 Other investments and loans 15 049 000 4 489 000 Current assets Inventory 20 608 000 16 902 000 Trade and other receivables 26 845 000 23 267 000 Cash and cash equivalents 18 248 000 9 614 000 Total assets 202 321 000 165 017 000 EQUITY AND LIABILITIES Capital and reserves Share capital 20 507 000 15 031 000 Reserves 75 310 000 46 815 000 Total equity 95 817 000 61 846 000 Non-current liabilities Long-term portion of interest-bearing debt 43 485 000 45 763 000 Preference shares 4 922 000 4 922 000 Deferred taxation 10 878 000 9 652 000 Provisions 1 991 000 2 840 000 Current liabilities Trade and other payables 34 972 000 30 635 000 Short-term portion of interest-bearing debt 7 624 000 6 129 000 Bank overdrafts and short-term facilities 2 63200 3 230 000 Total equity and liabilities 202 321 000 165 017 000 MAC3702 ASSIGNMENT 2 Page 13 of 14 [TURNOVER] QUESTION 4 (continued) Notes 1. Net finance costs include interest received of R751 million (2021: R466 million) on other investments and loans, as well as on favourable cash balances. Additional information In an effort to diversify its business locally and add some new product lines, Monate Group is planning to take on a number of new projects. The board of directors has agreed to invest R15 billion over the next ten years in different projects within South Africa. In order to undertake only financially viable projects, it is important that the company monitors its cost of capital closely. Additional information is given below in respect of the financing instruments used by the company: 2. At 31 December 2022 Monate Group had three billion authorised ordinary shares. The companys shares are trading at a beta of 1,1 while risk-free investments are estimated to yield 3,50% per annum and the risk premium is approximately 5,25%. The dividend will be growing at annual rate of 7% for the coming years. 3. The preference shares were issued in January 2012 at R50 per share. The dividend paid has remained the same over the past nine years. Similar preference shares have an estimated market value of R70 each. 4. The interest-bearing debt is made up of two debt instruments: Long-term loan: The loan was issued three years ago for R40 billion and the balance on the loan is R21,082 billion (including R7,624 billion which is payable in a years time). The interest rate charged on this loan is 8% and the going interest rate in the market is 7%. Debentures: The R30 billion debentures were issued on 3 January 2020 at 8,5% per annum and are redeemable on 31 December 2027 at a premium of R1,25 billion. Similar debentures are trading at 7,25%. MAC3702 ASSIGNMENT 2 Page 14 of 14 QUESTION 4 (continued) REQUIRED: For each question below, remember to: Clearly show all your calculations in detail; Where necessary, indicate irrelevant amounts/adjustments with a R0 (nil-value); and Round all your workings to two decimals. (a) Calculate the Weighted Average Cost of Capital for Monate Group at 31 December 2022