Question 2 (50 marks) In classes, we have discussed and emphasized that cost of capital and its related issues that link and glue investing and financing decisions on the one hand and are critically important to capital budgeting in the shipping industry on the other.

Requirements:

(a) In your own words and understanding, discuss and explain the logical flows and steps that:

(i) cost of capital is linking and gluing investing and financing decisions in an integrated manner.(10 marks)

(ii) cost of capital facilitates the preparation of cashflow projection and its relevant projected items operating and financing activities in the cashflow projection. (10 marks)

(b) In your own words and understanding, elaborate and explain the significance and importance of cost of capital in financial management and dual decision-making. (10 marks)

(c) In your own words and comprehensive understanding, elaborate and discuss all the FIVE relevant issues and features in details that needed to be carefully considered and duly taken into account to estimate, quantity and arrive the most appropriate, sensible and logical cost of capital for cashflow projection, discounted cashflow analysis and capital budgeting decision. (20 marks)