Part c.

i.From the below figures of Collingwood Public Limited, calculate Weighted Average Cost of Capital (WACC) and annual cashflows required by its capital providers.

Interest rate, k_d

0.10

Statutory company tax rate, t_c

0.30

Proportion of t_cclaimed by shareholders,

0.60

Market value of debt, D

$20 000 000

Cost of equity capital, k_e

0.20

Market value of equity, E

$20 000 000

(ii)What are the main difficulties in calculating cost of capital for diversified companies?