a. The following has been extracted from the books of Toronto (Pty) Ltd as at end of 30th June 2022. Market Price Shares Outstanding Market Value $000 Debt (Book Value) - - 6,131 Class A Common: Staff 25.75 12,000,000 309 Class A Common 23.09 347,426,000 8,022 Class B Common 23.27 1,018,625,000 23,703 Total 38,165 You have been requested by the Senior Analyst to estimate the cost of Toronto (Pty) Ltd as at end of 30th June 2022. The beta for the company is estimated to be 0.79. The current-risk free rate is 4.07% while historical market risk premium is 6.89%. The yield on the companys long-term bond is 5.73% and the company is in the 40% marginal tax rate.

i. Calculate the cost of equity capital for the company. (2 marks)

ii. Calculate the cost of debt. (2 marks) Q P - ASM - 0 0 1 | R e v 0 0 6 E f f D a t e : 1 8 - 0 3 - 2 0 2 1 Page 4 of 4

iii. Estimate the value weights of equity and debt. (4 marks)

iv. Calculate the cost of capital for Toronto (Pty) Ltd. (4 marks)

v. Under what conditions will you advice the company to use this cost of capital for discounting any project it intends to undertake. b. In detail explain what you understand by WACC. (4 marks)

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