Ordinary Shares . . . Pic's sources of debt and equity finance are summarised as follows: Preference Shares 400,000 preference shares with a par value of 1.00 Preference share pays 7% on its par value Current market price is 0.98 (the shares are not redeemable or convertible) Bank Loan: A 600,000 bank loan is outstanding with an interest rate of 6% Fintech Plc pays corporation tax at a rate of 20%. 500,000 shares with a par value of 1.00 Current market price is 2.80 Current dividend payment is 0.20 and dividends are expected to grow at a constant growth rate of 5% per year Required (a) Calculate the company's cost of equity capital for ordinary shares commenting on the shortcomings of the approach used to estimate cost of equity. (6 marks) (b) Calculate the company's cost of capital for preference shares. (c) Calculate the cost of debt after tax. (d) Calculate the market value weighted average cost of capital (WACC). (2 marks) (2 marks) (6 marks) (e) Critically evaluate Fintech plc' WACC and the options available to lower their WACC. (9 marks) TOTAL: 25 MARKS