QUESTION ONE $[5$ MARKS$]$

Zayn Limited normal credit terms to Popo Limited are $30$ days but is prepared to allow a $2\mathrm{.}5\%$ rebate if it pays the account within $15$ days. Calculate the cost to Popo Limited of not accepting the discount.

QUESTION TWO $[25$ MARKS$]$

Marriot Traders uses a combination of shares and debt in their capital structure.

There are $3000000$ R$1\mathrm{.}50$ ordinary shares in issue and the current market price is R$2\mathrm{.}75$ per share. The latest dividend paid was $44$ cents and a $4\mathrm{.}5\%$ average growth for the past $3$ years was maintained.

The company has $1100000$ R$1\mathrm{.}50,4\%$ preference shares with a market price of R$1\mathrm{.}90$ per share.

Marriot Traders has a public traded debt with a face value of R$6000000.$ The coupon rate of the debenture is $4\%$ and the current yield to maturity of $8\%.$ The debenture has $3$ years to maturity.

They also have a bank overdraft of R$2000000$ due in $2$ years$$ time and interest is charged at $9\%$ per annum.

Additional Information:

$$ Marriot Traders has a beta of $1\mathrm{.}8,$ a risk$-$free rate of $8\mathrm{.}7\%$ and a return on the market of $15\mathrm{.}45\%.$

$$ Company tax rate is $28\%.$

Required:

$2\mathrm{.}1$ Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.

$(22)$

$2\mathrm{.}2$ Calculate the cost of equity, using the Gordon Growth Model. $(3)$