P Ltd went public by issuing 5 million shares of common stock @ $10 per share. The shares are currently trading at $15 per share.

Current risk -free rate is 6%, market risk premium is 9% and the company has a beta coefficient of 1.4.

During last year, it issued 50,000 bonds of $1,000 par paying 10% coupon annually maturing in 20 years. The bonds are currently trading at $900. The cost of Debt is 10.61%.

The tax rate is 30%.

Calculate: (a) Calculate the market value of equity [2 marks]

(b) Calculate the market value of debt [3 marks]

(c) Calculate the cost of equity [4 marks]

(d) Calculate the Weighted Average Cost of Capital (WACC) of P Ltd [6 marks]

(e) State the limitations of the Capital Asset Pricing Model (CAPM) [5 marks]

(f) With the help of relevant examples, differentiate between systematic and unsystematic risks. [10 marks]