QUESTION 2 (50 MARKS You have been recently appointed executivo in charge of finance for Omid (Pty) Ltd. The company is considering investing in the production of solar panels and related products. The junior accountant has provided you with the following information Details Sales Materials Labour Other variable overheads Fixed overheads Other operating costs Yeart R000 35 000 5350 10700 500 5000 3000 Yaar 2 R000 49 000 7500 15 000 600 5000 3 100 Year 000 53200 9.000 18 000 050 5000 3200 Year R000 57 400 10050 21000 700 5000 1400 Year 5 R000 55 200 9 000 18.000 750 5 000 3 300 . . In addition, the Junior accountant inform you of the following All canh tows and profits forecasts were prepared in present terms and can be adjusted based on inflation in respective years Sales variable avemends and fixed overnads are expected to suffer inflationary increases of 5 per year Materials and labour costs are expected to increase by 10% per annum: Other operating costs are expected to increase by 4% per year. The tax rate is 28% and payable in the year profits are made The company is financed by 75% equity and 25% debt with market values of R75m and R25m conpoctively. The company has an equity beta of 1,2. The rate on Treasury bits is 5 and considered to have no risk. The market risk etmium is 7,5%. The company's atter-tax cost of debt is 6% The following assumptions were made in preparing the financial information Profits are similar to cash flown for the purposes of this project evaluation All receipts and payments anse at the end of the year to which they relate, except for the projects initial outlay of Rom which is to be paid le immediately and Other operating costs figures have already used for tax capital allowances and nanichth depreciation adjustments. The noncurrunt asset bought for the project has no residual value Required: Given the information above, calculate the following: 1 (20) (4) Profits for the periods Weighted average cost of capital Net present value of the proposed project Recommendation on the acceptance of ction of the project with justifications Determine what the discount rate would be the net present value is to approximately equate zero (13) (3) (10) State any assumptions you make Your assumton must make sense given the regurements of the questions Round oft and mounts to the rest rand. The count factor should be rounded to the de places QUESTION 2 (50 MARKS You have been recently appointed executivo in charge of finance for Omid (Pty) Ltd. The company is considering investing in the production of solar panels and related products. The junior accountant has provided you with the following information Details Sales Materials Labour Other variable overheads Fixed overheads Other operating costs Yeart R000 35 000 5350 10700 500 5000 3000 Yaar 2 R000 49 000 7500 15 000 600 5000 3 100 Year 000 53200 9.000 18 000 050 5000 3200 Year R000 57 400 10050 21000 700 5000 1400 Year 5 R000 55 200 9 000 18.000 750 5 000 3 300 . . In addition, the Junior accountant inform you of the following All canh tows and profits forecasts were prepared in present terms and can be adjusted based on inflation in respective years Sales variable avemends and fixed overnads are expected to suffer inflationary increases of 5 per year Materials and labour costs are expected to increase by 10% per annum: Other operating costs are expected to increase by 4% per year. The tax rate is 28% and payable in the year profits are made The company is financed by 75% equity and 25% debt with market values of R75m and R25m conpoctively. The company has an equity beta of 1,2. The rate on Treasury bits is 5 and considered to have no risk. The market risk etmium is 7,5%. The company's atter-tax cost of debt is 6% The following assumptions were made in preparing the financial information Profits are similar to cash flown for the purposes of this project evaluation All receipts and payments anse at the end of the year to which they relate, except for the projects initial outlay of Rom which is to be paid le immediately and Other operating costs figures have already used for tax capital allowances and nanichth depreciation adjustments. The noncurrunt asset bought for the project has no residual value Required: Given the information above, calculate the following: 1 (20) (4) Profits for the periods Weighted average cost of capital Net present value of the proposed project Recommendation on the acceptance of ction of the project with justifications Determine what the discount rate would be the net present value is to approximately equate zero (13) (3) (10) State any assumptions you make Your assumton must make sense given the regurements of the questions Round oft and mounts to the rest rand. The count factor should be rounded to the de places