QUESTION 2 (20 marks) A. The Bidvest Group Limited headquartered in Cape Town has 50 000 shares valued at R820k and debt of R160k. The interest rate is 10% and current principle payment is 25%. It intends expand operation and expect EBIT of R210K to increase by half (50%). It can raise the required R300K by either borrowing or selling new shares. Bidvest Group can issue 15k share a price of R20 each. Debt levels can be raised a 12% with a principle payment of 5%. Determine the following: 1. ROE with the increased debt; (2 marks) 2. ROE with the increased shares; (2 marks) 3. ROIC with the increased debt; (2 marks) 4. ROIC with the increased shares (2 marks) B. You are the CFO of Bidvest Group Limited are worried about the bad debt ratio, which is currently running at 6%. By imposing a more stringent credit policy, sales will decrease by 5% and the bad debt ratio will decrease to 4%. If the cost of goods sold is 80% of the selling price, should you adopt the stringent credit policy? (6 marks) c. Critically discuss the three ways in which inflation can distort recorded financial performance. (6 marks)