MAC4865/Assignment_02 QUESTION 3 (10 marks) Jump Ltd is financed only by equity, valued at R11 million. Jump Ltd pays a dividend of R 1430000 to its shareholders annually. Dive Ltd's capital structure includes debt, valued at R 4 million (based on market value), in addition to equity valued at R 11 million. Dive Ltd's debt incurs interest paid of R270 000 per annum, where dividends are paid to shareholders amounting to 8800000 per annum. Jump Ltd and Dive Ltd are identical in all operating and risk characteristics, both based and operating in South Africa, where tax is payable at 27%. Assume there is no growth in dividends. Assume the debt is irredeemable. Required: 3.1 Calculate the value of the equity of Dive Ltd. (2 marks) 3.2 Calculate the cost of capital for Jump Ltd. (1 mark) 3.3 Calculate the cost of equity for Dive Ltd, and the cost of debt for Dive Ltd. (4 marks) 3.4 Calculate the weighted average cost of capital of Dive Ltd