Calculate the following based the information that will be provided below:

ProfitabilityRatios Calculations (two ratios)

4marks

?LiquidityRatios Calculations (Two ratios)

4marks

?Long term solvency/Debt ratios (Two ratios)

4marks

?Discussion of profitability, liquidity and leverage

10marks

?Suggestions on how the company may improveits profitability

4marks

?Cost of equity capitalcalculation

3marks

?Cost of debtcalculation

3marks

?Cost of preference sharescalculation

3marks

?WACCcalculation

3marks

?Discussion of WACC: (why the companyshould calculate WACC,andlimitations of the models used to calculate it)

Deep YellowLtd issued corporate bonds with a coupon rate of 8.0%. The face value is N$100 and the bondisstated on the statement of financial position at its total par value of N$80m. The bonds are currently trading at a price of N$94. Interest is payable annually in arrears. The maturity date is in five years' time. The company has also issued variable loan finance of N$10m at a current interest rate of 9.0% per year.

The company has 200 000preference shares at its N$95 - per - share par value.The cost of issuing and selling the preference share is expected to be N$5 per share.Preference dividends are payable annually in arrears. The non-redeemable preference shares are currently priced at N$106. The dividend rate is 7.8% and the company has recently paid the preference dividends for the current year.

The company's equity beta is 1.15 and the risk-free rate is 6%. The company uses a market premium of 6.5% as this is the average between 5-8 which is the range of the market risk premium recommended by some analysts. The current share price is N$3.20 and the company has 30 million ordinary shares in issue.

Statement of profit or loss for the year ended 31 December 2019: 2019 2018 |Sales 80 000 120 000 less: Cost of sales Opening inventory 25 000 22 500 Add: Purchases 50 000 91 000 75 000 113 500 Less: Closing inventory -15 000 -60 000 -17 500 -96 000 Gross profit 20 000 24 000 Less: Depreciation 1 00 3 000 Other expenses 90 000 -10 000 6 000 -9 000 Profit for the year 10 000 15 000 Statement of financial position as at 31 December 2019 2019 2018 Non-current assets Equipment at cost 10 000 20 000 Accumulated depreciation -8 000 -6 000 2 000 14 000 Current assets Inventory 15 000 17 500 Receivables 25 000 20 000 Bank 5 000 45 000 2 500 40 000 47 000 54 000 Equity: 42 000 44 000 Capital 38 000 36 000 Profit for the year 10 000 15 000 Drawings -6 000 -7 000 Current liabilities: Accounts payable 5 000 10 000 47 000 54 000