QUESTION ONE $[25]$

Netforce Security $($Pty$)$ Ltd Balance Sheets for $2024$ and $2023$ financial years are below:

Assets $20242023$

Non Current$/$Fixed $75000006500000$

Inventory $500000300000$

Receivables $450000420000$

Cash $65000080000$

$91000007300000$

Equity and Liabilities

Share Capital $($R$2$ shares$)50000004400000$

Share premium $200000100000$

Retained Income $700000400000$

Long term Debt $25000001500000$

Payables $700000900000$

$91000007300000$

The abbreviated Income Statement for the year ended $28$ February $2024$:

Sales $(50\%$ on credit$)3000000$

Cost of sales $2000000$

Depreciation $210000$

Interest Expense $87000$

Net Income before Tax $900000$

Dividends $330000$

Retained Income $300000$

Required:

$1\mathrm{.}1$ Calculate the following ratios for $2024$ and comment. Ratios for $2023$ are given in brackets.

$1\mathrm{.}1\mathrm{.}1$ Current ratio $(0,89$:$1)(3)$

$1\mathrm{.}1\mathrm{.}2$ Acid test ratio $(0,56$:$1)(3)$

$1\mathrm{.}1\mathrm{.}3$ The debtors collection period $(81$ days$)[$all debtors are on $60$ days accounts$](4)$

$1\mathrm{.}2$ Share capital and equity

$1\mathrm{.}2\mathrm{.}1$ Calculate the earnings per share and dividends per share for $2024.(4)$

$1\mathrm{.}2\mathrm{.}2$ Calculate how many shares were issued in $2024?(2)$

$1\mathrm{.}2\mathrm{.}3$ Refer to $1\mathrm{.}2\mathrm{.}2$ above. Were the shares issued at a premium? If so what was the premium per share? $(2)$

$1\mathrm{.}3$ Calculate the market to book ratio. Explain the significance of this ratio. $(3)$

$1\mathrm{.}4$ Calculate the return on equity using the Du Point Identity$/$Formula$.$ Explain whether management will be happy with this return. $(4)$

QUESTION TWO $[30]$

$2\mathrm{.}1$ Explain why a company needs to calculate its weighted average cost of capital. $(3)$

$2\mathrm{.}2$ Explain the components of the Dividend Growth $($DG$)$ Model and the Capital Asset Pricing Model $($CAPM$)$ formulae and suggest advantages and disadvantages of both methods. $(10)$

$2\mathrm{.}3$ Using the information below calculate the weighted average cost of capital $($WACC$),$ using the Capital Asset Pricing Model $($CAPM$)$ to calculate the cost of equity. $(17)$

Mogul Moulders is a manufacturing company. They need to replace some of their older equipment to improve service delivery and reduce costs. As a management accountant, you have been tasked to calculate their cost of capital.

The following information is presented to you in respect to the company$$s capital structure:

$$

$2\mathrm{.}5$ million R$2$ ordinary shares, currently trading at R$4$ per share.

$$

$1$ million $12\%$ R$2$ preference shares, currently trading at R$1\mathrm{.}50$ per share

$$

A bank loan of R$800000$ at $16\%$ interest per annum, payable in $8$ years.

Additional information:

$$

The company has a beta factor of $1\mathrm{.}4$ and a risk free rate of $6\%.$

$$

Its tax rate is $30\%$ and the return on market is $15\%.$

$$

The current dividend paid on the ordinary shares is $80$ cents per share and a growth rate of $13\%$ is maintained.

QUESTION THREE $[30]$

You are provided with information relating to Always Lasting, a sole trader.

$3\mathrm{.}1$ Calculate the percentage of goods sold on credit during February $2024.(2)$

$3\mathrm{.}2$ Calculate the amount that the business expects to receive from debtors during March $2024.(8)$

$3\mathrm{.}3$ Prepare the Cash Budget for March $2024.(20)$

INFORMATION:

$1.$

Sales figures for $2024$

MONTHS

ACTUAL

BUDGETED

CASH

CREDIT

CASH

CREDIT

JANUARY

$18800$

$75200$

FEBRUARY

$12600$

$50400$

MARCH

$19600$

$78400$

$2.$

Credit sales are generally collected as follows:

$$

$50\%$ in the month of sale $($these debtors receive a $5\%$ discount$)$

$$

$30\%$ after $30$ days $($in the month after sales$)$

$$

$15\%$ after $60$ days $($two months after sales$)$

$$

$5\%$ is written off as bad debts.

$3.$

With regard to trading stock, the following must be noted:

$$

The business maintains a mark$-$up percentage of $40\%$ on sales and a fixed base stock level. $($stock sold in a month is replaced in that month$)$

$$

All purchases of stock are made on credit

$$

Creditors are paid in the month after the purchase of the stock.

$4.$

Interest on fixed deposit amounts to R$4800$ per year. This is received in two equal instalments on $1$ March $2024$ and $1$ September $2024.$

$5.$

Operating expenses amount to R$18000$ per month and is paid by cheque.

$6.$

Salaries is R$24000$ per month. During March $2024,$ the four shop assistants will also receive their production bonuses of $80\%$ of their monthly salary.

$7.$

The total rent income for the previous financial year was R$36000.$ The rent is expected to increase by $15\%$ on $1$ March $2024.$

$8.$

The owner agreed that his drawings per month should exceed R$2000.$ This must comprise R$1500$ cash and R$500$ worth of trading stock.

$9.$

Renovations to the office and reception area were done during December $2023.$ New office equipment including computers were purchased on $1$ January $2023$ for R$96000.$ These are being paid off in $12$ equal monthly instalments. Depreciation on equipment amounts to R$7800($including the new equipment$).$

$10.$

Bank charges average R$500$ per month.

$11.$

R$2000$ per month is allocated for maintenance of buildings.

$12.$

Mr Always decided that, during March $2024,$ he will increase his capital contribution by R$40000$ cash and by R$17000$ w