QUESTION 4 Use the information provided to answer the questions. 4.1 Study the ratios provided below which were calculated from a project of Colchester Limited for 2020 and 2019 and provide suitable comments for each ratio. INFORMATION Ratio 2020 2019 Acid test ratio 0.91:1 1.32:1 Return on capital employed 16.18% 24.28% Trade receivables period 38.5 days 29.45 days Trade payables period 30 days 60 days Operating profit margin 20.47% 29.69% Inventory turnover period 60 days 40 days Additional information Credit terms to debtors are 30 days and credit terms offered by creditors are 60 days. The interest rate on long-term borrowing is 12%. 4.2 Calculate the weighted average cost of capital from the information provided below. INFORMATION Mac Limited intends investing in a new project. Finance can be obtained from banks at 15% and dividends are expected to be paid out to investors at a rate of 12% of ordinary shares. Assets are financed in the ratio 3:2 in favour of equity