b) Freeze Ltd. uses only debt and ordinary shares to finance its operations. Its current composition of debt is $75,300 of bank loans at an interest rate of 35%. The last dividend the company paid was $1.5 and the current ex div market price is $5. Dividends are estimated to grow at 5% per year. In the books of Freeze Ltd., ordinary shares are quoted at $50,400 at a price of 60 cents per share. Freeze Ltd. pays a corporate tax of 25%. Using the information provided above, calculate the; Page 2 i. ii. cost of equity, cost of debt, and iii. weighted average cost of capital of Freeze Ltd. a. 50% equity and 50% debt b. 30% equity and 70% debt iv. [3 marks) [2 marks) [3 marks) weighted average cost of capital if the capital structure of Freeze Ltd changes to [2 marks] [2 marks) c. What do you observe as the proportion of debt in the capital structure increases? [2 marks]