QUESTION $3(20$ marks$)$

$($a$)$ Explain the following three $(3)$ financial assets that traded on the Botswana Stock Exchange $($BSE$)$:

$($i$)$ Bonds. $(2)$

$($ii$)$ Equities. $(2)$

$($iii$)$ Exchange Traded Funds. $(2)$

$($b$)$ A firm has a capital structure made up of P$20$ million worth of equity and P$10$ million worth of debt.

The dividend expected to be paid in the next period is $15$thebe, the after$-$tax cost of debt is $15\%,$ the

current market price is $80$ thebe, and the growth rate is $12\%.$

Required:

$($i$)$ Calculate WACC. $(5)$

$($ii$)$ Given that the firm is contemplating to raise P$10$ million in new equity at $60$thebe with floatation

costs of $4$ thebe per share, calculate the cost of new equity and MWACC. $(9)$