Mathenthenyana Industries is a large tyre manufacturing company based in Francistown whose debt has a

market value of P40 million and pays 15-percent rate of interest on the debt whose beta is 1.41. The company

has 3 million outstanding shares of stock each selling for P20 per share. The corporate tax rate is 34 percent.

The risk premium on the market is 9.5 percent and the risk-free rate is 11 percent.

i. Find the cost of equity

[3 marks]

ii. Find the after-tax cost of debt

[3 marks]

iii. Find the weight of debt and equity respectively

[4 marks]

iv. Calculate Mathenthenyanas WACC and comment on what it means.

[4 marks]