Pera 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%.

(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 Pera Ltd (6 marks)

(e) Explain the term systematic risk (3 marks)

(f) Explain the term unsystematic risk (3 marks)

(g) How do systematic risk and unsystematic differ from each other? (4 marks)

(h) State the limitations of the Capital Asset Pricing Model (CAPM) (5 marks)