Question 3 (15 marks) You have just been hired to compute the cost of capital for debt, preference shares and ordinary shares for the Mindflex Corporation. Show all the steps how you find them. a) Cost of debt: Because Mindflex's bonds do not trade very frequently, you have decided to use 9% as your cost of debt, which is the yield to maturity on a portfolio of bonds with a similar credit rating and maturity as Mindflex's outstanding debt. In addition, Mindflex faces a corporate tax rate of 30%. b) Cost of debt: Now let us assume Mindflex's bonds are frequently traded. A Mindflex bond has a $1000 face value (par value) and a coupon interest rate of 13% that is paid semi-annually. The bonds are currently selling for $1125 and will mature in 20 years. Mindflex's corporate tax rate is 30%. c) Cost of preference shares: Mindflex's preference shares pay a 7% dividend on a $125 face value. However, the market price at which the preference shares could be sold is only $90. Page 2 of 4 FINANCIAL MANAGEMENT - ASSESSMENT A d) Cost of ordinary shares: Mindflex's ordinary shares paid a $ 1.25 dividend last year. In addition, Mindflex's dividends are growing at a rate of 6% per year and this growth rate is expected to continue into the foreseeable future. The price of these shares is currently $30