Question 02 A. The directors of M Company are considering opening a new factory to manufacture a new product at a cost of Rs 30.0 million. During the last 5 years, the company has had 30 million shares in issue. The current market price of these shares (at 31 December 2019) is Rs.10.45 ex dividend. 2/5 The company pays only one dividend each year (on 31 December) and dividends for the five years have been as follows: Year Dividend per share (cents) 2019 1.41 2018 1.41 1.21 1.16 2015 2017 2016 1.10 M Co currently has in issue Rs.10 million (nominal) 7% debentures, mature in five years time on 31* December 2024. The current market price of these debentures is Rs.83.60 ex interest, and the interest is payable each year on 31 December. Debentures will be redeemable at par at the maturity. The company also has 2 million, 6% preference shares in issue which are irredeemable. The current market price of these preference shares are Rs. 10.4 ex interest. Company pays corporate tax at the rate of 25% per annum. Required: For the M Company I. Calculate the cost of equity II. Calculate the cost of debentures III. Calculate the cost of preference shares IV. Calculate the weighted average cost of capital