4: Cost of Capital The Directors of Space Technologies Limited (SPL.) have appointed you as their business and financial consultant. The company is seeking to finance new project investments for space exploration and requires you to estimate their present cost of capital to facilitate the evaluation of such projects viability. Currently the capital structure of the company features the following: (i.) 2.50 million ordinary shares with a par value of 50 cents each, currently trading at R4.00 per share. The company has a beta () of 1.4, a risk free (Rf) rate of 9% and a return on the market (Rm) of 16 % pa. (ii.) 1.50 million 12%, R 2.00 preference shares, with a market value of R 2.50 per share. (iii.) R 3.00 million 10 %, debentures due in 5 years and the current yield-to-maturity is 8%. (iv.) R 700 000, 15% bank loan, due in December 2027. (v.) The company also has a general reserve of R 5 500 000 and a retained income of R 6 000 000. Additional information: The dividend growth of 10% per annum was maintained over the past 4 years. The latest dividend paid was 50 cents per share. Assume a company tax rate of 30%. Required: 4.1 Calculate the weighted average cost of capital. Use the Capital Asset Pricing Model to calculate the cost of equity. (20 marks) 4.2 Calculate the cost of equity, using the Gordon Growth Model. (5 marks