1. Do you agree with the cost of capital estimate detailed by Kyle Brooks in Exhibit 6? Why or why not? If you do not agree, how would you adjust the

WACC for Royal Mail				Cost of Equity
	Capital Sources	Book Values	Percentage	Dividend per share	21
	Current Debt	290	6%	Price per share	511
	Non-current Debt	559	12%	Dividend Yield	4.110%
	Equity	3,846	82%
	Cost of Debt			Risk-free Rate	1.551%
	Current Debt	0.900%		Beta	0.65
	Non-current Debt	4.375%		Market Risk Premium	5.8%
	Weighted Average	3.188%		CAPM Cost of Equity	5.321%
				Weighted Average Cost of Capital
				Tax Rate	20.0%
				WACC	3.828%
WACC for Comparable Companies
		National Grid	Severn Trent	Tesco	United Utilities	Vodafone
	Debt / Value	45%	47%	41%	50%	29%
	Cost of Debt	3.188%	3.188%	3.188%	3.188%	3.188%
	Cost of Equity	4.912%	3.653%	7.500%	4.000%	6.957%
	WACC	3.853%	3.136%	5.475%	3.281%	5.660%