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Please avoid Excel Calculations Question 4 [6 Marks] Midvaal Company uses only debt...

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Please avoid Excel Calculations

Question 4 [6 Marks] Midvaal Company uses only debt and common equity. It can borrow unlimited amounts at an interest rate, ra =8% as long as it finances at its target capital structure, which calls for 60% debt and 40% common equity. Its last dividend (D.) was R3, its expected constant growth rate is 5%, its common share sells for R30. Midvaal tax rate is 30%. Two projects are available: Project A has 5 MBL5903 OCTOBER NOVEMBER 2020 a rate of return of 13%, and Project B's return is 10%. These two projects are equally risky and about as risky as company's existing assets. Required: 4.1. What is the cost of common equity? What is the WACC? 4.3 Which Projects should Midwest accept? (2) (2) 4.2. (2)

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