Sources of Capital 10% Bond 12% Preference Share (10m shares) Common stoks (30m shares) Total Amount (in million) $1,000 $1,000 $3,000 $5,000 The bond of PQZ will mature in 5 years (from now) has yield to maturity of 8%. While the preference share is currently trading at $115 per share, the market price of PQZ's common stock is $259. The common stock has beta of 1.25 and the corporate tax rate applicable to PQZ is 30%. The T-bill rate is 4% and excess market return is 6%. a. Compute the cost of debt after tax, cost of preference share and cost of common stock for PQZ. [2+2+3] b. Prepare a market-value based capital structure of PQZ, i.e. compute the market value of bonds, preference shares and common stocks. [8 marks] c. What is the weighted-average cost of capital (WACC)? Note that WACC should be based on market-value weights (why?).