Question 5 (11 Marks) The Georgian Bay Ice Company Ltd (Georgian) is looking to determine its cost of capital and has asked you to assist. Information available includes the following: Preference Shares: The preference shares were issued for $15 with a 10% dividend. The current market price is $16. When they were initially issued, they issued $75m worth of shares. Debt: The debt that the firm has issued was issued 20 years ago and has 7 years left to maturity. The bonds pay a semi-annual coupon of 5% pa. The bonds were issued for $1000 each and are currently valued at $1000 each. 20 years ago $100,000,000 worth of debt was issued . Ordinary Shares: The company has 200 million ordinary shares on issue with a market price of $2 each. The Beta of these shares is 2, the market risk premium is 7% and the risk free rate is 4%. These shares last paid a dividend of 30 cents with expected growth of 3%. Other Information: Georgian's tax rate is 30%. Calculate the following: A) Determine the EAR of the YTM for the debt that matures in 7 years. (2 Marks) Please answer as a decimal to 4 decimal places. Answer: B) Determine the required return on the preference equity. (2 Marks) Please answer as a decimal to 4 decimal places. Answer: Answer: C) Determine the required return of the ordinary equity using the CAPM. (2 Marks) Please answer as a decimal to 4 decimal places