Question 2: (15 marks) Given the following information for McCumber Energy Debt - 7,000 6 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling for 106 percent of par; the bonds make semi-annual payments Preferred shares - 15,000 shares paying a dividend of $3.65 per preferred shares outstanding currently selling at $72 per share Common shares - 300,000 common shares outstanding, selling at $55 per share. McCumber Corporate Tax Rate: 35% Table 1 - Market data: 35.2 Year 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Risk fre rate (R) Return from the market (Rm) Beta 1.81 12.3 1.20 1.75 15.5 1.5 1.70 1.42 1.80 (33.1) 1.33 1.92 9.83 1.4 1.87 17.2. 1.5 1.88 24.1 1.45 1.90 14.5 1.2 1.85 (10.2) 1.6 1.77 8.3 1.25 a) Calculate the average Risk free rate (Ri). Return from the market (Rm) and beta (B) from data collected in the last ten years in Table 1. b) Calculate the market value of each component of the capital structure of the company. c) Calculate the cost of debt, cost of preferred shares and cost of common shares. Note: Use CAPM for the cost of common shares using your averages for Rr. Rin and Beta d) Calculate the weighted average cost of capital (WACC) for McCumber Energy. lentin