(Solved): Use the information provided below to calculate the following (expressed as percentages to two decim ...

Use the information provided below to calculate the following (expressed as percentages to two decimal places): 1.1 Cost of equity using the Capital Asset Pricing Model (4 marks) 1.2 Cost of preference shares (4 marks) 1.3 Cost of debt (3 marks) 1.4 Weighted average cost of capital (using your answers from questions 1.1 to 1.3) (5 marks) 1.5 Cost of equity using the Gordon Growth Model. (4 marks) INFORMATION Cyber Limited intends raising finance from three sources to fund its expansion. The following information is available to calculate the cost of capital: The capital structure consists of the following: ■ 2 million ordinary shares trading at R6 each according to the Johannesburg Securities Exchange but issued at R4 each a few years ago. ■ 3 million 9.5%, R2 preference shares which incurred floatation costs of 5% of the issue price. ■ R2 000 000 20% bank loan, due in June 2028. Additional information ■ The company tax rate is 27%. ■ A dividend growth of 10% per annum on ordinary shares was maintained over the past five years. The last dividend paid was 110 cents per share. ■ The company’s beta coefficient is 1.3. ■ The risk-free rate is 8%. ■ The return on the market is 20%.