The company has 550,000 shares outstanding, which are selling for $3.98 per share.

Its debt is selling at book value with a yield to maturity of 8.8%.

From available market data you estimate the return on the market and inflation to be 9.5% and 1.5% respectively.

The company's beta is 1.45 and the company tax rate in New Zealand is 28%.

a. Calculate the companys cost of debt before and after taking the tax deductibility of interest payments into account. (3 marks)

b. Calculate the cost of equity. (3 marks)

c. Calculate the weighted average cost of capital. (7 marks)

d. Based on a rough estimate of the project's free cash flows that management provided, you calculate a large internal rate of return of 27.5%. Despite your concerns that the management might be a little too optimistic with their forecasts, would you recommend pursuing the international expansion into Asia? (2 marks)

PureMeat Corporation Balance Sheet as at 30 April 2021 Assets $000 Liabilities & Equity $000 Cash 75 Accounts Payable 672 Accounts Receivable 855 Accrued Marketing Expense 9 Inventory 650 Accrued G&A Expense 18 Total Current Assets 1,580 Total Current Debt 699 Fixed Assets 1,957 Long Term Debt 700 Accumulated Depreciation (795) Share capital 950 Net Fixed Assets 1,162 Retained Earnings 393 Total Assets 2,742 Total Debt and Equity 2,742 The company has 550,000 shares outstanding, which are selling for $3.98 per share. Its debt is selling at book value with a yield to maturity of 8.8%. From available market data you estimate the return on the market and inflation to be 9.5% and 1.5% respectively. The company's beta is 1.45 and the company tax rate in New Zealand is 28%. Required You can type your answers and working straight into the box below, or you can type your answers into a document or a spreadsheet, and cut and paste into the box below, or add or drop the file into the file box below the textbox, or you may handwrite the answers, take a photo and upload into the File uploading box at the bottom of this screen (scroll down). You can download the formula sheet here if you haven't already a. Calculate the company's cost of debt before and after taking the tax deductibility of interest payments into account. (3 marks) b. Calculate the cost of equity