QUESTION ONE Sasol is a major South Africa energy and chemicals group. It mines coal and produces liquid fuels and chemical products. The group also produces gas and oil. Sasol is the largest producer of synthetic fuels in the world with sales of over R181 billion. In the 2013 integrated report, Sasol indicated that its weighted average cost of capital (WACC) is 12.95% in South Africa, 8% - 11.2% in Europe and 8% in the USA. Sasol's share price appreciated strongly in 2013 and early 2014 before falling significantly at the end of 2014 due to the collapse in oil prices. Sasol reported that the volatility of financial markets, the lack of liquidity and the increase in the cost of debt affected the company's cost of capital. (b) Calculate the WACC from the information provided in the Table below, using two different approaches to calculate the weighting factors (using balance sheet values and market values). (10 marks each) Balance Sheet Extract from Sasol Capital Balance Sheet Value Market Value Ordinary shares R10,000 R1.72 (20,000 with nominal value of R0.50) 8% preference shares R5,000 RO.98 per R1 (R1.00 nominal value) Long-term liabilities 10% R7,500 R1.04 per R1 debentures The cost of equity has been calculated at 9.5 per cent. The corporation tax rate is 30 per cent