SUBJECT 2 Company ABC plans to finance a new 12-year investment project that it costs 1,000,000.00 euros with own and foreign (loan) funds. Equity (reinvestment of the company's profits) will cover 40% of the project's cost, while the foreign funds will be allocated to a bank loan (30%) and a bond issue loan (30%). The details of how the project will be financed are as follows: - For equity it is given that the current share price of ABC company is equal to 10.00 euros. The company just paid a dividend of 1 euro per share and the annual rate dividend growth rate is 2%, stable, and is expected to remain there level for the next period. - The following data are given for foreign funds: o The bank loan has a duration of 12 years and will be repaid in 12 equal amounts annual payments. The annual interest rate of the loan amounts to 9%. o The company's corporate bonds also have a term of 12 years with interest issue equal to 5%. The nominal value of the bonds amounts to 1,000 euros while their market value is equal to 916.16 euros. Use the information above to calculate: A. the cost of equity capital (km). (Grade 1.0) B. the cost of a bank loan after taxes (qd). (Grade 0.5) C. the bond loan cost (y). (Grade 2.0) D. the weighted average cost of capital (WACC). (Grade 1.5) Assume the following: - The new investment has the same level of risk as another investment he has ABC is already involved. - ABC has the same percentages of capital sources in all its investments. - The corporate tax rate is 30%. - There is no flotation cost for any source of capital.