2. Your manager requires you to show how you would calculate the WACC for a company for educational purposes. Information on the different sources of finance and market prices are provided below. Your manager wishes for you to evaluate this company's current structure in an aim to identify the current returns required for the company. This company has the following balance sheet and details (below): Long-term debt $ Bonds: Par $1,000, annual coupon 4% p.a., 6 years to maturity 20,000,000 Equity Preference shares 5,000,000 Ordinary shares 15,000,000 Total 40,000,000 Notes: The bank has advised that the interest rate on any new debt finance provided for projects would be 3% p.a. if debt issue is of similar risk, time to maturity and coupon rate. There are currently 500,000 preference shares on issue, which pay a dividend of $1.45 per share. The preference shares currently sell for $11.67. There are currently 7,500,000 ordinary shares which currently sell for $1.78 each. Last year the company paid a dividend of 80.25 per share. Historically, dividends have increased at an annual rate of 3% p.a. and are expected to continue to do so in the future. The company tax rate is currently 30%. Your manager requires you to provide full calculations for the market values for each source of capital, the after-tax costs of each source and the weighted average cost of capital (WACC). Further, your manager wishes you to provide a summary of whether, or not, this company would be good to invest if a required a rate of return in excess of 7% p.a. is needed. (16 marks)