Big Bus Tours is a tour operator from the Okanogan Valley. The business has the following capital structure as at Dec 31, 2017. ($million)

Long Term Loan 8% 55

Preferred Shares (100,000 outstanding) 25

Common Shares (100,000 outstanding) 20

The common shares have a current market value of $250 and the current level of dividend is $15 per share. The dividend has been growing at a compound rate of 6% a year in recent years. The Long Term loan is perpetual and has a current market value of $80 per $100 nominal. The nonredeemable preferred share has current market value of $200 per share and pays dividend of $20 per share. Tax rate is 30%.

1. Calculate the Cost of Capital (Long Term Loan): 

2. Calculate the Cost of Capital (Preferred Shares): 

3. Calculate the Cost of Capital (Common Shares): 

4. Calculate the Weighted Average Cost of Capital for Big Bus Tours: 

WACC

Answer rating: 100% (QA)

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