Project 2 : Bills Enterprise The second proposal concerns Bills Enterprise Ltd, whose main business activity is construction of houses. A new tender has been awarded to build 100 teachers houses in Central province. The accounting team identified the following projected cash flows: Investment outlays are K 6 million immediately and K1 million as working capital at the end of the first year increasing 30% up to year four. In year five only K200, 000 is required the rest is to be returned. After - tax operating cash inflows are K0.5 million at the end of the first year and K0.7 million at the end of each of the second, third, fourth, and fifth years from block making to help with the working capital of the project. A major payment of K10 million will be received at the end of the five year period as the houses will be handed over to Ministry of Education. Additional Information: Kays Home Depot is a listed company on the Lusaka Stock Exchange and its financing structure is as follows: Ordinary shares of K1 each 250 Retained profits 150 9% irredeemable K1 preference shares 50 7% loan stock 2019 250 Total 700 The ordinary shares were quoted at K2.50 ex div on 31st December 2018.The beta of Kays Home s equity shares stands at 0.8,the annual yield on treasury bills is at 7%.The financial markets despite the effect of Covid -19 expects an average annual return of 15% on the market index. The market price per preference shares was K0.90 ex div on 31st December 2018. Loan stock interest is paid annually in arrears and is allowable for tax at a tax rate of 30%.The loan stock was priced at K100.50 per K100 on 31st December2018.Loan stock is redeemable on 31st December 2021. The required rate of return on the construction of new houses project is being determined. Taxation is charged at 30% and paid in arrears. Tasks Required: a. Calculate the required rate of return using Capital asset pricing model (CAPM) for Kays Home as at 31st December 2019.Breifly explain the implications of a Beta of less than 1 in relation to Kays Home. (5 marks) b. Calculate the weighted average cost of capital of Kays Home Depot as at 31st December 2019 ( 10 marks) c. Calculate the Net present value of this project using the correct cost of capital found in either a or b. Explain why that particular cost of capital has been chosen considering the project risks. (15 marks)