QUESTION ONE $[25]$

Study Traders uses a combination of shares and debt in their capital structure. The company issued $4000000$ R$5$ ordinary shares with a current market price of R$7,95$ per share. The latest dividend paid was $89$ cents and an $12\%$ average growth for the past ten years were achieved. The company issued $1900000$ R$6,10\%$ preference shares with a current market price of R$9$ per share.

Study Traders has a public traded debt with a face value of R$4000000$ at a coupon rate of $10\%$ and a yield to maturity of $13\%.$ The debenture has six years to maturity.

A bank overdraft of R$1000000$ is due in three years at an annual interest rate of $15\%.$

The company's beta is $1\mathrm{.}1$ with a risk$-$free rate of $6,6\%$ and a market return of $12,2\%.$ The company is taxed at $27\%.$

You are required to:

$1\mathrm{.}1$

Calculate the weighted cost of capital using the Gordon Growth Model. $(22)$

$1\mathrm{.}2$

Calculate the cost of equity by using the Capital Asset Pricing Model. $(3)$