60.1K

Verified Solution

Link Copied!

MAMB Ltd. can only afford to undertake one of these projects and, if they do choose one, the funds required for the project will have to be obtained with long-term financing (i.e., long-term loans, ordinary shares and preference shares). MAMB Ltd. wants to maintain the long-term capital structure weights that applied in their June 2023 balance sheet (see below) for the foreseeable future. Accordingly, MAMB Ltd. decides to use the June 2023 financial statements to calculate the applicableWACCrequired to evaluate these 2 proposed projects. However, the directors of MAMB Ltd. want to be sure thate the WACC for 2023 is not too different from the WACC for 2022, so theyrequested you to calculate both. The financial statements for the last two years are as follows:

Bh-'IL Ltd Balance Sheet for the financialyea 11s ended on 30 June 2022- and 2023 30Jun22 30Jun23 Rmillion Rmillion Assets Cash Prepaym ents 124 Accounts receivable 3335 Inventories 3 680 Total Current Assets 77 10 Plant and equipment 35 7'00 Less: Accumulated depreciation 15923 Net book value: Plant and Equipment 1977? Deferred tax 48 Long-term investment assets 299 Total Fixed Assets 22109 20124 Total Assets 28812 27834 Liabilities and Shareholders' Equity Creditors 2319 Bank overdraft 1186 Accrued taxes payable 249 Total current liabilities 3753 Long-term loan 1 (8% fixed rate till maturity in 2022 Long-term loan 2 (10% fixed rate till maturity in 2026) 3 000 Long-term loan 3 (12% fixed rate till maturity in 2030) 5000 Total LongTerm liabilities Total Liabilities Ordinary share capital (40 million shares issue d) 45 00 Retained earnings (reserves) 9180 Preference share capital (2 million shares issued) 2400 Total Shareholders Equity 14900 Total Li abilities and Shareholders' Equity 28812 BML Ltd. Income Statement for the financial years ended 30 June 2022 and 2023 2022 2023 Rmillion Rmillion 13179 14414 Total operating expenses 8064 9273 Earnings before interest and tax 5164 5199 1262 1078 3902 4121 Net income 2810 2967 Other information: 2022 2023

Answer & Explanation Solved by verified expert

See Answer