ABC Manufacturing Ltd. is a mid-sized company specializing in the production of industrial machinery. Over the past five years, the company has experienced consistent growth, increasing its market share and revenue. However, to maintain competitiveness and expand operations, ABC Ltd. needs additional financing of ZMW 50 million to invest in advanced technology and expand its production facilities. Currently, the company has ZMW 100 million in total assets, funded by a mix of 40% equity and 60% debt. The company's debt consists of long-term bonds and bank loans with an average interest rate of 7%. ABC Ltd.’s shareholders expect a return of at least 12%, while the company’s financial advisors recommend a financing mix that optimizes cost and risk. Additional information The company is considering the following financing options: 1. Issuing new equity to raise the required funds. 2. Taking on additional debt through a syndicated loan with a lower interest rate. 3. Issuing corporate bonds with a maturity of 10 years. 4. Exploring private equity or venture capital investment. ABC Ltd. must evaluate the cost of capital, financial risk, shareholder expectations, and long term profitability before making a decision. Required 1. Calculate the Weighted Average Cost of Capital (WACC) of ABC Ltd. before acquiring new financing. Assume a corporate tax rate of 30%. (5 marks) 2. Discuss the advantages and disadvantages of issuing new equity compared to taking on additional debt. (4 marks) 3. What factors should ABC Ltd. consider when deciding between issuing corporate bonds and taking a syndicated loan? (3 marks) 4. Explain how changes in ABC Ltd.’s capital structure could affect its financial risk and return on equity. (3 marks) 5. If ABC Ltd. chooses private equity or venture capital investment, what impact might this have on its corporate governance and strategic decisions?