Question $2(25\%)$

Florence Food complex Company has $60$ million common stock

shares with a total value of $480$ million dirhams. These common

stocks are currently trading at $25$ dirhams per share. The

company has recently distributed a dividend of $4$ dirhams per

share and is expected to achieve an annual growth rate of $7\%.$ In

addition, the company has issued preference shares with a total

value of $55$ million dirhams, consisting of $6$ million preference

shares. The annual dividend per preference share is set at $12$

dirhams per share, and the most recent trading price for a

preference share is $130$ dirhams per share. The company carries

long$-$term debts worth $180$ million dirhams, with an average

interest rate of $10\%$ per annum. Florence Food complex

Company operates under a marginal tax rate of $30\%.$

Required:

$($a$)$ Calculate the costs of each sources of capital.

$($b$)$ What is the weighted average cost of capital of the

company?