a. A friend is trying to determine their companys weighted average cost of capital but is really not sure how to do this. You have been advised that the cost of ordinary equity is 12%, preference shares are 19% and the pre-tax cost of debt is 6%. The weight of preference shares is 25% and ordinary shares are 70%. The tax rate is 20%. Calculate the after-tax Weighted Average Cost of Capital (WACC). (1 Mark) Please answer as a decimal to 4 decimal places.

b. Your cousin has advised you that the Debt-to-Equity Ratio (total debt to total equity) is 1.2 and that of his equity he has 70% ordinary shares. Determine the weight of debt, ordinary equity and preference equity to be used in the calculation of the after tax WACC. (4 Marks) Please answer all parts as a decimal to 4 decimal places. This means that if your answer is 55.55% answer as .5555

Weight Debt Answer:

Weight Total Equity:

Weight Ordinary:

Weight Preference