FIN3701 Assignment 2 2025 – Due 24 April 2025

MathethePharm’s senior financial analyst has gathered the following information:
MathethePharm can raise R160 000 through the sale of a R1 000 par value, 8% annual coupon
rate and a ten-year debenture. The debenture will be issued at 5% discount and R20 flotation cost
per debenture. Additional funds will be raised through the bank loan with an after-tax cost of 10%.
R425 000 is available through retained earnings. Additional funds will be raised through the
issue of new ordinary shares. The company pays a regular dividend of R10, has a growth rate
of 3% and nets R87.30 after flotation costs. The flotation costs are calculated at 3% of the par
value (R90) of a share.