Please explain all the questions step by step , make references to the theories and the formulas used.

1. ABC has the following capital structure, which is considered to be optimal: Debt 25%, Preferred stock=15% and ordinary or common shares 60%. The tax rate is 40% and investor's expect earnings and dividend to grow at 6% in the future. ABC paid a dividend of 3.70 per share last year (D0), and its shares currently sell at the price of 60 per share. Ten year T-bill rate is 6% and market risk premium is 5% and ABC's beta is 1.3. Price of preferred share is 90 and dividend is 9. Bonds could be sold at an interest rate of 9%. What is the WACC? 2. ABC plc, which pays corporate tax at 30 per cent, has the following capital structure: a. Ordinary shares: 1000000 ordinary shares of nominal value 25p per share. The market value of the shares is 79p per share. A dividend of 5p per share has just been and dividends are expected to grow by 5 per cent per year for the foreseeable future. b. Preference shares: 250,000 preference shares of nominal value 50p per share. The market value of the shares is 42p per share and the annual net dividend of 7.5 per cent has just been paid. c. Bonds: 100,000 of 7 percent irredeemable bonds with a market price of 102 per 100 par. The annual interest payment has just been made. Calculate the weighted average after tax cost of capital. 3. Calculate the weighted average cost of capital for the following company, using both book value and market value weightings. \fThe debt is permanent and its market value is equal to book value. The rate of Corporate Tax is 30%. The ordinary shares are currently trading at 4.50. 4. Modern Cloth plc, a textile manufacturer. is considering the implementation of a new project for diversifying into the manufacture of dyes and other chemicals. The company's treasury team has been asked to estimate the current weighted average cost of capital of Modern Cloth pic for discounting the cash flows associated with the proposed project. The company's latest Statement of Financial Position sheet is summarisedbelow: ( millions) Non-current assets 450 Current assets 270 Less: Current liabilities () Net Assets 555 Financed by: Ordinary shares (50 pence par value) 150 Share premium account 50 Revenue reserves 95 8% Preference Shares (50 pence par value) 80 6'/2% Redeemable bond (100 par value) m Capital Employed 555