Voor$-$En$-$Toe Ltd is in the pharmaceutical industry sector and has been expanding in the recent past

due to a change in its strategic direction from regulated medicines to natural remedies and holistic

medicine. The company has recently identified a project it wants you to evaluate and recommend

whether they should accept or reject. You are provided with the following tabulated financial and

additional information:

Additional information:

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 R$75$m and

$R25m$ respectively. It has an equity beta of $1,2.$ The rate on treasury bills issued by the

South African Reserve Bank is $5\%$ and considered to have no risk. The market risk premium

is $7,5\%.$ The company's after$-$tax cost of debt is $6\%$;

Profits after tax are similar to cash inflows for the purposes of this project evaluation; and

All receipts and payments arise at the end of the year to which they relate except for the

project's initial outlay of $R30m$ which is paid at the beginning of the project $($ie immediately$).$

Required:

Given the information above, calculate the following:

i$.$ Profits for the periods $(20$ marks$)$

ii$.$ Weighted average cost of capital $(4$ marks$)$

iii. Net present value of the proposed project $(13$ marks$)$

iv$.$ Recommendation on the acceptance or rejection of the project with justifications $(3$

marks$)$

v$.$ Discuss the advantages of the net present value technique over the payback period and

internal rate of return techniques when capital budgeting $(10$ marks$)$

Round off the rand amounts to the nearest rand. The discount factor should be rounded to three

decimal places.