Question B2 Ho Smart Investments Company Limited has excess cash on hand and is going to invest in a profitable project. You are the Chief Financial Officer of the company and are responsible for estimating the discount rate which is the cost of capital for capital budgeting appraisal. The financial information of your company and some related market information are shown below: Common stock: There are 50 million shares outstanding of $5 par selling for $35 per share. The stock has a beta coefficient of 2.4. The management of the company just paid annual dividend of $1.6 per share and the market expects all future dividends will grow by 3 percent per year thereafter Preferred stock: 8 million shares selling at $93 per share, with dividend rate of 6 percent and face value of $100. Debt: Five years ago, the company issued 7 million 15-year zero coupon bonds with par value of $1,000 that are still outstanding now. It is currently selling for $630. Market: The current Treasury bill yields 4 percent and the expected retum on the market is 8 percent. The company is in the 40% corporate tax bracket. Required: (a) Assess the cost of equity (Re) by employing both Dividend Growth Model and CAPM, cost of preferred stock (Rp) and pre-tax cost of debt (Rp). (answers in %] (7 marks) (b) Determine the company's capital structure weights (WE. Wp, Wo) for equities and debt. answers in % (3 marks) (c) Assuming that the company is going to maintain the current capital structure, estimate the weighted average cost of capital (WACC) of the company. (answers in %] (2 marks) (d) Under what condition is the company's WACC an appropriate discount rate for this project? (2 marks)