Consider the following information:

Extract of balance sheet for COCO Ltd. as at 30 March 2020:

Equity

$'000

Issued And Paid-UpCapital

25m30cordinaryshares

7,500

15.5m$12.5% preferenceshares

15,500

Reserves and Retained Profits

Retained profits

7,000

Share premium reserve

8,200

General reserve

6,000

Debt

44,200

Mortgage

3,200

Debentures

4,580

Bank overdraft

10,555

18,335

You also have the following additional information available to you as of today:

The current market price of the firm's ordinary shares is$2.80.

The firm's preference shares are currently selling for $1.20each.

The debentures will mature in 5 years. They have a coupon rate of 7% perannum.

Ifthecompanycurrentlysoughtlong-termfinanceitwouldhavetopayinterestratesof9.2% perannumondebentures.Anamountof$3,800,000isowingonthemortgageandhas5years remaining and was taken out at 10% current rates are12%.

The firm is currently paying 7% per annum on its bank overdraftloan.

Interest on debentures, mortgage and the bank overdraft is paidhalf-yearly.

The corporate tax rate is 30 cents in thedollar.

The estimated Beta of the company's ordinary shares is1.8.

The current yield on a 10-year government bond is 4.5% perannum.

The expected return on the market portfolio is 11% perannum.

Required:

a)Which items in the balance sheetshould not be includedin the calculation ofWACC?

b)Calculate the market value of each relevantitem.

c)Calculate before and after tax costs and WACC.Display your results in the tablebelow.

Show your full working out.Fill in the table below.

Component

Market Value

Weighting

Before-Tax

After-Tax

Weighted