UNIVERSITY OF SOUTH AFRICA (UNISA)
COURSE NAME: FINANCIAL MANAGEMENT
COURSE CODE: FIN3701
ASSIGNMENT 3
SEMESTER: Semester 1, 2026
DUE DATE: 17 April 2026
Complete ,trusted solutions and explanations
QUESTION 1 [15 marks] Oreatli Company’s optimal
capital structure consists of 30% debt and 70% equity.
The interest rate on its debt is a constant 12%, while the
, cost of ordinary share funding from retained earnings is
15%. The company’s marginal tax rate is 28%. Oreatli
has identified the following investment opportunities: •
Project A: cost = R70 000; IRR = 16,5% • Project B: cost =
R70 000; IRR = 15,2% • Project C: cost = R40 000; IRR =
12,4% • Project D: cost = R60 000; IRR = 10,1% Oreatli
has R120 000 in available earnings.
REQUIRED: 1.1 Calculate Oreatli Company’s weighted
average cost of capital (WACC). (3)
Given:
- Debt: 30%
- Equity: 70%
- Cost of Debt: 12%
- Cost of Equity: 15%
- Tax Rate: 28%
WACC = (D% x Kd x (1 - T)) + (E% x Ke)
where:
- D% = Debt percentage
- Kd = Cost of debt
COURSE NAME: FINANCIAL MANAGEMENT
COURSE CODE: FIN3701
ASSIGNMENT 3
SEMESTER: Semester 1, 2026
DUE DATE: 17 April 2026
Complete ,trusted solutions and explanations
QUESTION 1 [15 marks] Oreatli Company’s optimal
capital structure consists of 30% debt and 70% equity.
The interest rate on its debt is a constant 12%, while the
, cost of ordinary share funding from retained earnings is
15%. The company’s marginal tax rate is 28%. Oreatli
has identified the following investment opportunities: •
Project A: cost = R70 000; IRR = 16,5% • Project B: cost =
R70 000; IRR = 15,2% • Project C: cost = R40 000; IRR =
12,4% • Project D: cost = R60 000; IRR = 10,1% Oreatli
has R120 000 in available earnings.
REQUIRED: 1.1 Calculate Oreatli Company’s weighted
average cost of capital (WACC). (3)
Given:
- Debt: 30%
- Equity: 70%
- Cost of Debt: 12%
- Cost of Equity: 15%
- Tax Rate: 28%
WACC = (D% x Kd x (1 - T)) + (E% x Ke)
where:
- D% = Debt percentage
- Kd = Cost of debt
