Question 3 a. Use the following information to calculate the optimal cost of capital for Dim Ltd. - The systematic risk of equity as measured by beta, is 0.8 The risk free rate of interest is 10% The expected return on the market portfolio is 15% The sources of funds used by Dim Ltd. and their respective market values are: Source of Funds Debt (par value $100 per bond) Market Value $ 1 m $3 m The coupon rate on bonds is 1 100 paid annually. They are due to mature in 8 years' time, and have a current market value of $111 per bond. The company tax rate is 30% b. Under what assumptions is the cost of capital you have calculated for Dim Ltd. in (a appropriate for a proposed project