Question: If cannot answer all, preferably answer E please :) Canada Cranes is looking to determine its cost of capital and has asked you to assist.

If cannot answer all, preferably answer E please :)
Canada Cranes is looking to determine its cost of capital and has asked you to assist. Information available includes the following: Preference Shares: The preference shares were issued for $20 with a $1 dividend. The current market price is $15. Debt: The debt that the firm has issued was issued 15 years ago and has 5 years left to maturity. The bonds pay a quarterly coupon of 5% pa. The bonds were issued for $1000 each and are currently valued at $1000 each. Ordinary Shares: These shares currently trade for $5. . The Beta of these shares is 1.5, the return on the market is 10% and the risk free rate is 3%. These shares last paid a dividend of 40 cents with expected growth of 2.5%. Other Information: Canada Cranes' tax rate is 20%. Calculate the following: A) Determine the EAR of the YTM for the debt that matures in 5 years. (2 Marks) Please answer as a decimal to 4 decimal places. Answer: B) Determine the required return on the preference equity. (2 Marks) Please answer as a decimal to 4 decimal places. C) Determine the required return of the ordinary equity using the CAPM. (2 Marks) Please answer as a decimal to 4 decimal places. Answer: D) Determine the required return of the ordinary equity using the dividend discount model (DDM). (2 Marks) Please answer as a decimal to 4 decimal places. Answer: E) The Debt-to-Equity ratio of the company is 0.6. In terms of equity, 80% is ordinary equity. Determine the weight of debt, ordinary equity and preference equity to be used in the calculation of the after tax WACC. (3 Marks) Please answer as a decimal to 4 decimal places. Answers: Weight Debt Weight Ordinary Weight Preference
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