You have been provided with the following information with respect to the capital

structure of a plastic manufacturing plant:

Market values

Equity

Ordinary share capital R3 000 000

Non-redeemable preference shares R6 000 000

Debt

Bonds R3 500 000

The current risk-free rate is 7,1%, while the current return on the market is

13,2%. The company's beta to the market is 1,3.

The non-redeemable preference shares were issued at R6 per share. An

annual dividend of 11% is paid at the end of every year. The shares are

currently trading at R6,50 per share.

The 12% bonds are redeemable at a premium of 15% above the par value of

R1 000 in five years' time. Similar bonds are currently trading at R990.

Coupons are paid annually.

The company tax rate is 28%.

16. Calculate the cost of equity. (3)

a) 24,26%

b) 15,03%

c) 7,1%

d) 13,2%

17. Calculate the cost of preference shares. (3)

a) 6,6%

b) 10,15%

c) 6,50%

d) 12,67%

18. Calculate the cost of debt. (3)

a) 12,31%

b) 9,67%

c) 8,64%

d) 11,31%

19. Using your calculated cost of capital calculated in questions 16-18, calculate

the weighted average cost of capital (WACC). (3)

a) 15,03%

b) 12,16%

c) 11,65%

d) 11,31%