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QUESTION 2 (25 Marks) been appointed as a financial consultant by the directors of Cochin Limited (Ltd). They require you to You have been appointed as a financial consultant by the din calculate the cost of capital of the company. The following information is available on the capital structure of the company: 1 500 000 Ordinary shares, with a market price of R4 per share. The latest dividend declared was 93 cents per share. A dividend growth of 14% was maintained for the past 5 years. 1 000 000 12%, R1 Preference shares with a market value of R3 per share. R1 000 000 9%, Debentures due in 7 years and the current yield-to-maturity is 10%. R1 200 000 15% Bank loan, due in June 2024. Additional information: 1. The company has a tax rate of 30%. 2. The beta of the company is 1.7, a risk free rate of 5% and the return on the market is 17%. Required: 2.1 Calculate the weighted average cost of capital (WACC). Use the Gordon Growth Model to calculate the cost of equity. (22 marks) 2.2 Calculate the cost of equity, using the Capital Asset Pricing Model