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In: AccountingQuestion 2: Capital structure and dividend policy. 25marks1.1 The following information relates to two...Question 2: Capital structure and dividend policy. 25marks1.1 The following information relates to two companies which tradein a Modigliani and Miller world:Sanlam SantamCost of equity 20% 18%Cost of debt 12% -Dividends 200 000 432 000Interest 150 000 -Shares 1000 1000Required:(a) Calculate the WACC for Sanlam and Santam. (b) Calculate the correct value for Sanlam shares assuming thatSantamās shares are correctly valued. (c) Explain what is meant by the term āarbitrageā with reference tothe M&M theory. 1.2 Suppose Sanlam ltd wishes to finance a major restructuringproject whose total cost is N$75 Million. The company follows aresidual policy on dividends. Earnings for the coming year areexpected to be N$60 Million and the company maintains a debt toequity ratio of 0.5 (50%). An extract from the statements offinancial position is shown below:Statement of Financial position extract: 2018 2017Equity: Ordinary shares of N$0.50 each N$5 000 000 N$5 000000Required:(a) Calculate the following:(i) dividend per share;(ii) the value of additional debt, and(iii) ordinary share capital to be raised in order to finance therestructuring project.