QUESTION 2 (25) TimTam Limited uses a combination of shares and debt in their capital structure. The details are given below: There are 5 million ordinary shares in issue with a par value of R1.20 each and the current market price is R5 per share. The latest dividend paid was R0.64 and a 9.3% average growth for the past six years was maintained. The company has 3 200 000 R4,8% preference shares with a market price of R2.20 per share. TimTam Limited has a public traded debt with a face value of R3 million. The coupon rate of the debenture is 7% and the current yield to maturity of 10%. The debenture has 6 years to maturity. They also have a bank overdraft of R0.8 million due in 5 years' time and interest is charged at 15% per annum. Additional Information: TimTam Limited has a beta of 1.9, a risk-free rate of 8% and a return on the market of 15%. Company tax rate is 28%. Required: 2.1 Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate the cost of equity. (22) 2.2 Calculate the cost of equity, using the Capital Asset Pricing Model. (3)