Retail Relate has its head office in Johannesburg and trades in the FMCG market.

The company has a capital structure of $10000000$ par value R$1$ ordinary

shares, with a current trading price of R$2,50.$ Retail Relate have also issued

preference shares of $100000010\%$ dividend R$1$ shares, market price R$2.$

Reserves of the company per their published financial statements are R$5000000.$

They have a received a bank loan from Beep Bank of R$10000000$ at an interest

rate of $15\%.$ In addition, there are Debentures of $5000000$ at par value $12,5\%$

market price R$110($issued at R$100).$

In order to equalize the tax effect, the debenture and bank loan interest weighting

is reduced by multiplying it by $1$ minus the given corporate tax rate$(27\%).$

The current and expected future rate of ordinary share dividends is $15\%.$

REQUIRED:

a$)$ Calculate the overall market value of retail relates capital structure. $(10)$

Market Value Proportion

b$)$ Calculate the overall cost$/$returns of each type of finance. $(10)$

Ordinary shares

Preference shares

Debentures

Bank loana$)$ Calculate the overall market value of retail relates capital structure. $(10)$