QUESTION 5) Cost of Capital (10 marks) After 10 years of aggressive growth, Honibe has the...

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QUESTION 5) Cost of Capital (10 marks) After 10 years of aggressive growth, Honibe has the following capital structure listed on the Balance Sheet Long Term Loan 8% Preferred Shares (100,000 outstanding) Common Shares (100,000 outstanding) $5 m $2 m $3 m The common shares have a current market value of $40 per share and the current level of dividend is $4.40 per share. The dividend has been growing at a compound rate of 4% a year in recent years. The Long Term loan is perpetual and has a current market value of 590 per $100 nominal. The nonredeemable preferred share has current market value of $20 per share and pays dividend of $2 per share. Tax rate is 30% a) Calculate the Cost of Capital (Long Term Loan): (2 marks) b) Calculate the Cost of Capital (Preferred Shares): (2 marks) c) Calculate the Cost of Capital (Common Shares): (2 marks) d) Calculate the Weighted Average Cost of Capital for Big Bus Tours: (4 marks) WACC QUESTION 5) Cost of Capital (10 marks) After 10 years of aggressive growth, Honibe has the following capital structure listed on the Balance Sheet Long Term Loan 8% Preferred Shares (100,000 outstanding) Common Shares (100,000 outstanding) $5 m $2 m $3 m The common shares have a current market value of $40 per share and the current level of dividend is $4.40 per share. The dividend has been growing at a compound rate of 4% a year in recent years. The Long Term loan is perpetual and has a current market value of 590 per $100 nominal. The nonredeemable preferred share has current market value of $20 per share and pays dividend of $2 per share. Tax rate is 30% a) Calculate the Cost of Capital (Long Term Loan): (2 marks) b) Calculate the Cost of Capital (Preferred Shares): (2 marks) c) Calculate the Cost of Capital (Common Shares): (2 marks) d) Calculate the Weighted Average Cost of Capital for Big Bus Tours: (4 marks) WACC