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 $50c$ each$)$

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$.$

b$)$ Outline the fundamental assumptions underlying the use of WACC as a discount within the context

of Sasha Pty Ltd$.$