Question 4 Jones Co issued 12 million ordinary shares and has an equity beta of 1.2. The market value of each ordinary share is 6.50. The company is also financed by 6% bonds with a nominal value of 100 per bond, which will be redeemed in seven years' time at nominal value. The bonds have a total nominal value of 13 million. Interest on the bonds has just been paid and the current market value of each bond is 105. The risk-free rate of return is 5% per year and the average return on the stock market is 13% per year. The company pays corporation tax at a rate of 20% per year. Required: a) From the information provided, calculate using market values, Jones Co's weighted average cost of capital (showing all workings clearly) (17 marks) b) Explain the difference between systematic and unsystematic risk in relation to portfolio theory and the capital asset pricing model. (8 marks) c) Evaluate FOUR practical problems that Jones Co might encounter when computing WACC. (10 marks)