Data about a company and the financial markets are given below. All rates are effective annual rates. Assume a classical tax system. - The company has 1 million shares with a market value of $2 each. The shares expected dividend yield is 4% pa and the growth rate of dividends is expected to be 3% pa in perpetuity. The beta of the companys equity is 0.75. - The company is also funded by a 5-year loan with a 6% pa interest rate. The loan is currently worth $3 million. - The corporate tax rate is 30%. - Government bonds yield 4% pa and pay a fixed coupon rate of 5% pa. - The ASX200 market index has a total expected return of 8% pa.

• • Calculate the companys required return on equity ()
• • Calculate the companys before-tax WACC.
• • Calculate the companys after-tax WACC.
• • Calculate the companys loan debt beta () based on its interest rate.
• • Calculate the companys present value of interest tax shields assuming that the appropriate discount rate for the interest tax shields is the cost of debt and the proportion of debt funding in the company is constant.