SECTION A [30 MARKS] Answer ALL the questions in this section. QUESTION ONE Burnley Limited uses a combination of shares and debt in their capital structure, The details are given below. - There are 10 million R6.40 ordinary shares in issue and the current market price is R9.80 per share. The latest dividend paid was R1.06 and a 16% average growth for the past six years were maintained. The company has 5 500 000 R5, 18% preference shares with a market price of R7.60 per share. Burnley Limited has a public traded debt with a face value of R6 000 000. The coupon rate of the debenture is 11% and the current yield to maturity of 18%. The debenture has 9 years to maturity. They also have a bank overdraft of R4 000 000 due in 8 years' time and interest is charged at 17% per annum. 8 Burnley Limited has a beta of 25, a risk-free rate of 7% and a return on the market of 15%. The company tax rate is 28%. Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity (21 marks) 1.2 Calculate the cost of equity, using the Gordon Growth Model. (4 marks) QUESTION TWO 2.1 Kane Industries normal credit terms to Spurs Limited are 45 days but is prepared to allow a 5.5% rebate if it pays the account within 15 days. Calculate the cost to Spurs Limited of not accepting the discount