Question $1[40$ marks$]$Sasha Pty Ltd is a small company based in San Diego in the state of California in the United States. Management is considering a rapid expansion of its operations in the near future. The chief financial officer believes that discounted cashflow techniques are the best suited appraisal methods for their new projects. The most recent statement of financial position $($formerly balance sheet$)$ for Sasha is given below as follows:Authorised share capital $(15000000$ shares at $50$c each$)$ $Issued share capital $(10000000$ shares at $50$c$)5000000$Share premium $2340000$Revaluation reserve $1610000$Retained income $4615000$Shareholders funds $13565000$ $$12\%$ irredeemable debentures $250000010\%$ redeemable debentures $200000014\%$ long$-$term loan $30000007500000$The shares of Sasha Pty Ltd have a current market value of $$1\mathrm{.}56$ cum div. A dividend of $18$ cents is due to be paid shortly. All debt interest is paid annually in arrears and has just been paid. Sasha has been growing at a rate of $5\%.$ The CFO believes the company will be able to maintain this growth rate for the foreseeable future.The $12\%$ debentures have a market value that is $80$ per cent of the book value. The $10\%$ debentures are to be redeemed in eight years time at $$95$ per $$100$ nominal. The company has a current market required return of $16\mathrm{.}67$ per cent before tax. The $14$ per cent loan is not traded on the open market, but its effective pre$-$tax cost has been estimated at $18$ per cent. It is redeemable at par in three years time.Sasha has a tax rate of $40$ per cent.Required:a$)$ Calculate the after$-$tax WACC of Sasha Pty Ltd$.(28$ marks$)$b$)$ Outline the fundamental assumptions underlying the use of WACC as a discount within the context of Sasha Pty Ltd$.(12$ marks$)$ Question $2[4$ marks$]$Jack will graduate from high school at the end of this year. He needs to buy a laptop for university one year from today. The laptop is expected to cost $$1200.$Required: a$.$ If Jack can earn $4$ per cent on his money, compounded yearly, how much would he have to put in a savings account today? $(2$ marks$)$b$.$ How much would he have to put into a savings account today if he can earn $6$ per cent on his money, compounded yearly? $(2$ marks$)$ Question $3[23$ marks$]$Chakuma Pty Ltd is a relatively new company based in the Limpopo Province in South Africa. It is a farming business. It supplies mangoes to overseas customers, especially in the USA. Thatho is an ambitious young executive who has recently been appointed by Chakuma Corporation. He believes in rapidly growing Chakuma through mixed farming. He would like to diversify Chakumas business to include the rearing of animals. Thatho recently raised $$350000$ to invest in one of three projects described below. Project A involves beef production. Thatho and his team will be required to secure Ankole cows from Uganda, which is in north$-$central Africa. This breed of cows is famed for their rich creamy milk and tender meat. Project B involves poultry farming. Thatho and this team will be required to secure a special breed of chickens from Zimbabwe known as road runners. This breed of chickens is famed for being very fast on their feet particularly when they are evading predators. They also produce relatively hard meat compared to imported poultry meat from overseas. This meat from road runners has become very popular among South Africans in recent years.Project C involves Sheep farming. Thatho and his team will be required to secure a special breed of sheep from Namibia. This breed of sheep has spent centuries adapting to the harsh climate of the Kalahari Desert. The directors of Chakuma believe that the sheep will thrive in the Karoo where the climate is more friendly than the Kalahari.The CFO has evaluated the three projects and came up with projections given below as follows: Net cashflows $($R$000)$ Years Project $012345678$ A $-350100110104112138160180-$B $-35040100210260160---$C $-35020015024040----$ The CFO would like to use the payback method and the accounting rate of return $($ARR$)$ to appraise the projects. He is not very familiar with the use of the NPV appraisal method. He believes the NPV method has major drawbacks and is not suitable in this case. He personally favours projects that show large accounting profits and payback invested funds early in their lives. Chakumas cost of capital is $20$ per cent.Required:a$)$ What is the payback period for each project? $(5$ marks$)$b$)$ What is the accounting rate of return for each project? $(8$ marks$)$c$)$ Explain the meaning of NPV and outline the major advantages and disadvantages of this method. $(5$ marks$)$d$)$ What are the limitations of using the CAPM for capital budgeting decisions? $(5$ marks$)$ Question $4[6$ marks$]$Jack Ltd is a company listed on the JSE. The current price of its ordinary shares is R$20$ per share. One year from now, the price will be either R