FIN3701 Assignment 2 Semester 1 2026 Due 17 April 2026

UNIVERSITY OF SOUTH AFRICA
College of Accounting Sciences


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FIN3701: Financial Management

Assignment 02 — Semester 01, 2026

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FIN3701
Module Code:
Financial Management
Module Name:
02
Assignment Number:
17 April 2026
Due Date:
50
Total Marks:




Submitted in partial fulfilment of the requirements for FIN3701 — UNISA 2026

, UNISA | FIN3701 Assignment 2 — Cost of Capital and Capital Budgeting



Question 1: Oreatli Company — Capital Budgeting and Dividend Policy [15 marks]

The weighted average cost of capital (WACC) serves as the minimum acceptable rate of re-
turn on investment projects for a firm, since it represents the overall cost of financing across
all capital sources (Gitman and Zutter, 2015:388). For Oreatli Company, whose optimal cap-
ital structure consists of 30% debt and 70% equity, the WACC forms the benchmark against
which each investment opportunity is evaluated.


1.1 Weighted Average Cost of Capital (3 marks)


The WACC is calculated using the following formula:


   
E D
WACC = × Ke + × Kd × (1 − T )
V V

Step 1: After-tax cost of debt




Kd (1 − T ) = 12% × (1 − 0.28)

= 12% × 0.72

= 8.64%



Step 2: WACC calculation




WACC = (0.70 × 15%) + (0.30 × 8.64%)

= 10.50% + 2.592%

= 13.09%




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