3. Mr. Ahmed has approached you to prepare a capital structure analysis. (25 marks) Particulars Salalah Mills Equity Beta 1.8 Yield on risk-free government securities 7% Historic premium above the risk-free rate is estimate for shares 5% Estimate of Cost of borrowed money to the company (before tax 8% shield benefits). Market value of the Firm Equity - 75% Dubai Mills 1.5 6% 5% 6% Equity -65% MEC_AMO_TEM_035_02 Page 2 of 11 Principles of Financial Investment (BUSS 23001) - Fall - 2020 - CW 2 (Assignment) - All - OP Debt -35% Debt - 25% 30% Corporation tax 25% You are advised prepare a report as follows, A. Estimate the Equity cost of capital using CAPM for both companies. (4 marks) B. Calculate the cost of Debt after tax for both companies. (4 marks) C. Ascertain an estimate of the weighted average cost of capital (WACC) for both companies. (8 marks) D. Which company is in a better position in terms of capital structure? Justify: (9 marks)