Question: Assume Kwaito Sounds is at present planning a major restructuring involving the following actions. It plans to sell part of the CD/DVD production division for

Assume Kwaito Sounds is at present planning a major restructuring involving the following actions. It plans to sell part of the CD/DVD production division for R 50 million. This part of the division is currently earning R 5 million before interest and taxes. The cash from the sale of the division will be used to buy back shares. The dividend payout ratio will be reduced to 15%. a. Estimate the D/E in market value terms, the new ROIC and the new ROE [3 marks] b. Estimate the new growth rate in earnings, after the restructuring. [2 marks] c. Estimate the new cost of equity for Kwaito Sounds after the restructuring. [5 marks]

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