Susan Fashions is expanding and needs to work out her cost of capital to evaluate several different proposals. Susan Fashions has obtained the following information. Long term debt is an issues of long term bonds that have $10million face value and a 4% coupon rate paid half yearly. Each bond has a face value of $100,000 and has seven years to maturity. The last sale of a bond was at a yield of 4.8%pa. Susan Fashions preference shares are trading on the share market at $5.60 a share, below their $10 par value. The preference share issue was a 5%, $10 non- redeemable preference share. The last sale of Susan Fashions ordinary shares was at $0.90. The beta of Susan Fashions has been calculated at 1.5, Government bonds are selling in the market at 3.5 %pa and the expected return on the market portfolio is 13%pa Given that Susan Fashions has a target capital structure of 35%Debt, 20% Preference shares and Ordinary shares being the balance of financing, Answer the questions below to help Susan work out her weighted average cost of capital if Susan pays tax at 30%:

(a) What is the market value of the firms debt? (b) What is the firms cost of equity? (c) What is the cost of the firms preference share? (d) What is the firms WACC?