QUESTION $2(20$ marks; $24$ minutes$)$

Immaculate Wooden Furnishers Ltd $($Immacu$)$ is a wooden furniture manufacturer. The environmental

lobby group has been up in arms regarding Immacu$$s failure to plant the agreed upon number of trees

following its illegal felling of trees in the neighbouring community. Furthermore, the company has been

fined for its questionable waste dumping practices. Immacu is listed on the Johannesburg Stock

Exchange and has a February financial year$-$end. The following information for the financial year ended

$29$ February $2024$ is available:

Number of issued ordinary shares $3000000$

Price per share R$8$

Long$-$term loans R$15000000$

Debentures R$?$

Earnings before interest and tax R$10000000$

Additional information:

$1.$ Immacu has $15$ million authorised ordinary shares. The dividend paid to ordinary shareholders for

the year ended $29$ February $2024$ was R$1,20$ per share, and the expected dividend growth rate is

$5\%$ per annum. The government bonds currently yield $8\%,$ beta is estimated at $1,3,$ and the market

risk premium is $9\%.$

$2.$ The long$-$term loan bears interest at $13\%$ per annum, payable annually in arrears together with the

capital amount in equal instalments. The JIBAR rate used for similar long$-$term loans is $12,5\%.$

$3.$ Immacu issued $100000$ redeemable debentures at a nominal value of R$100$ each. The debentures

bear a coupon rate of $12\%$ per annum and are redeemable in six years$$ time. The market return on

similar debentures is $11\%.$

$4.$ The current company taxation rate is $28\%.$

REQUIRED:

For each question below, remember to:

$$ Clearly show all the formulas used;

$$ Clearly show all your detailed calculations; and

$$ Round percentages to two decimal places and final answers to the nearest rand.

$($a$)$ Identify and briefly discuss three environmental, social and$/$or governance factor that

Immacu should consider which may affect their operations which are eminent from the

given scenario.

$(6)$

$($b$)$ Calculate the cost of equity of Immacu, using the Capital Asset Pricing Model. $(4)$

$($b$)$ Calculate the current market value of the bonds of Immacu.

Use the mathematical formula, showing the formula and detailed substitution OR use

the financial calculator showing all detailed inputs.

$(4)$

$($c$)$ Calculate the current weighted average cost of capital $($WACC$)$ of Immacu for the year

ended $29$ February $2024.$