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(5 marks) Question 2 (Cost of capital and capital structure determination a) A firm borrows money at 9% interest after taxes and pays 11% for equity. The company raises capital in equal proportions, i.e., 70% debt and 30% equity. Determine the Weighted Average Cost of Capital (WACC) of the Firm. b) Determine the cost of common equity. The current market price of stock is SR 200, and the stock pays Expected dividend of SR8 with a growth rate of 5%. c) Determine the cost for a preferred stock that pays annual dividend SR 6, has issue price SR 40, and incurs flotation costs of SR 3 per share. (4 marks) Question 3 (Working capital) a) What is the Hedging principle and how can it be used to manage the working capital of the firm? b) Describe the following term: I. Permanent asset investments II. Temporary asset investments III. Permanent sources of financing IV. Temporary sources of financing V. Spontaneous sources of financing