QUESTION $4(15$ marks$)$

The following information relates to ADE LTD for the year ended $31$ March $2024.$

Share market price

R$7\mathrm{.}68$

Expected EPS for next year

R$1\mathrm{.}28$

Dividend payout ratio

$30\%$

Expected growth rate

$11\%$ p$.$a$.$

Capital structure. Source No$.($millions$)$ R$$m Price Cost

Equity

$100$

$600$

R$7\mathrm{.}68$

$15\mathrm{.}20\%$

Preference shares

$100$

$100$

R$0\mathrm{.}8571$

$14\mathrm{.}87\%$

Debentures

$3$

$300$

R$93\mathrm{.}80$

$8\mathrm{.}43\%$

Total Funds

$1000$

REQUIRED Marks

$($a$)$

Calculate the WACC of ADE LTD$.$

$(7)$

$($b$)$

What is the total rand amount of projects can ADE LTD finance before the cost of capital increase $($break point$)?$

$(4)$

$($c$)$

Calculate the break point for debt. The company$$s financier has advised that it will increase the interest rate to $12\mathrm{.}8\%$ if the incremental borrowing for the year increases above R$60$m$.$

$(4)$ TOTAL $15$