a) Distinguish between an illiquid and a segmented capital market. Briefly discuss what effect capital market illiquidity and segmentation may have on the cost of capital of a firm.

b) This question is based on Exhibit 13.3 in chapter 13 of the textbook. In this example, Nestles cost of equity is calculated using two different market portfolios, a domestic market portfolio and a global market portfolio. Which of these is more appropriate? Support your answer with appropriate arguments.