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  • MAC3702 - Application Of Financial Management Techniques (MAC3702)
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MAC3702 Assignment 2 2021 Semester 1&2 #748062 COMPLETE

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MAC3702
Assignment 2, Semester 1&2 2021

Unique number: 748062

For ECP and Semester 1 & 2 students

, QUESTION 1

Determine how the new coding infrastructure should be financed, considering the funding
options available to TSL as well as the current capital structure on 31 May 2021 using book
values

Financing will be as follows:


Equity 190,000.00
New ordinary shares 190,000.00

Debt (Ordered from cheapest source) 610,000.00
Loan from Crypto Bank 200,000.00
Loan from FNB Bank 50,000.00
15% Preference shares (Balancing figure) 360,000.00

800,000.00



CALCULATIONS

Current value of the company 2,020,000.00
New investment 800,000.00
Company capitalisation after investment 2,820,000.00



Desired D:E ratio 1:1


Debt Equity
New capitalisation 1,410,000.00 1,410,000.00
Existing capitalisation 800,000.00 1,220,000.00
Finance 610,000.00 190,000.00




Calculate the weighed average cost of capital of TSL based on market values after the
financing of the new project. For this part, assume preference shares are nonredeemable.


Weighed Average Cost of Capital

Capital Amount Weight Cost Weighted cost
Equity 1,410,000.00 50% 0.2005 0.1003
Loan from Crypto Bank 200,000.00 7.09% 0.1332 0.0094
Loan from FNB Bank 730,000.00 25.89% 0.1200 0.0311
Preference shares 480,000.00 17.02% 0.1563 0.0266
2,820,000.00 0.1674

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