Barnyard Traders uses a combination of shares and debt in their capital structure.

The details are given below:

There are $20$ million R$10\mathrm{.}80$ ordinary shares in issue and the current market price is R$8\mathrm{.}50$ per share. The latest dividend

paid was $99$ cents and $11\%$ average growth for the past six years was maintained.

The company has $10500000$ R$9,8\%$ preference shares with a market price of R$8\mathrm{.}80$ per share.

Barnyard Traders has a public traded debt with a face value of R$18000000.$ The coupon rate of the debenture is $7\%$ and

the current yield to maturity of $15\%.$ The debenture has $8$ years to maturity.

They also have a bank overdraft of R$8000000$ due in $4$ years$$ time and interest is charged at $12\%$ per annum.

Additional Information:

$$ Barnyard Traders has a beta of $1\mathrm{.}2,$ a risk$-$free rate of $6\mathrm{.}5\%$ and a return on the market of $11\mathrm{.}5\%.$

$$ Company tax rate is $30\%.$

Required:

$2\mathrm{.}1$ Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.

$(22$ Marks$)$

$2\mathrm{.}2$ Calculate the cost of equity, using the Gordon Growth Model. $(3$ Marks$)$