Richelieu Investments Limited has the following capital structure, which is considered ideal, taken from the annual report and market data as at December 31, 2010:

* There are 7 million shares outstanding at a market price of $30 per share. The corporate income tax rate is 30%. The dividends on common shares are expected to grow at 5% per year.
Required:
(a) Determine the cost of capital as at December 31, 2010, for each of the following components:
(i) Debt
(ii) Preferred shares
(iii) Common shares.
(b) Calculate the weighted average cost of capital for Richelieu Investments Limited.

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Price Dividend Balance Sheet Market ValueperUnit per Share 10% bonds Preferred shares Common shares Retained earnings 100,000,000 $90,000,000 $90.00 N/A 0,000,000 15,000,000 30.00 $2.50 1.50 N/A 200,000,000 50,000,000 30.00 N/A