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  • University Of South Africa (Unisa)
  • MAC3702 - Application Of Financial Management Techniques (MAC3702)
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MAC3702 Assignment 2 Semester 1 & 2 and ECP 2021 #748062 COMPLETE

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MAC3702 - Application Of Financial Management Techniques (MAC3702)
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MAC3702 Assignment 2 Semester 1 & 2 and ECP 2021 # ECP students have the same assignment

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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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