The directors of Ideya Limited have appointed you as their financial consultant to calculate the cost of

capital for the company.

The present capital structure is as follows:

$$ Two million ordinary shares with a par value of $75$ cents per share. These shares are currently

trading at R$4\mathrm{.}50$ per share and the latest dividend paid is $30$ cents. An average dividend growth

of $13\%$ is maintained.

$$ One and a half million $14\%$ R$3\mathrm{.}00$ preference shares, with a market value of R$5\mathrm{.}00$ per share.

$$ R$2000000$ non$-$distributable reserves.

$$ R$8000008\%$ debentures due in $6$ years$$ time and the current yield$-$to$-$maturity is $6\%,$ and

$$ R$90000013\%$ bank loan.

Additional information:

$$ The company has a beta of $1\mathrm{.}7,$ a risk$-$free rate of $5\%$ and enjoys a premium of $8\%.$

$$ The company's tax rate is $30\%.$

Required:

$3\mathrm{.}1$

$3\mathrm{.}2$

Calculate the weighted average cost of capital, using the Gordon Growth Model to calculate

the cost of equity.

Calculate the adjusted weighted average cost of capital, using the Capital Asset Pricing

Model as the cost of equity.