QUESTION 2 (25 Marks) You have been appointed as a financial consultant by the directors of FICA Limited. They require you to determine the cost of capital of the company. The following information is available on the capital structure of the company: 20 000 000 ordinary shares, with a market price of R6 per share. The latest dividend declared was 98 cents per share. A dividend growth of 18% was maintained for the past 5 years. 10 000 000 11%, R2 preference shares, with a market value of R3.20 per share. R12 000 000 11%, debentures due in 8 years and the current yield-to-maturity is 9%. R1 300 000 13%, bank loan, due in December 2027. Additional information: - The company has a tax rate of 30%. - The beta of the company is 1.3, a risk-free rate of 8% and the return on the market is 18%. Required: 2.1 Calculate the weighted average cost of capital. Use the Gordon Growth Model to calculate the cost of equity. (22 marks) 2.2 Calculate the cost of equity, using the Capital Asset Pricing Model. (3 marks)