The following figures have been extracted from the financial statements of SPY:

-Book Value of Current Assets $35 million and Current Liabilities $29.25 million

-Long-term Loan: $4.32 million

- Retained Earnings: $22.50 million

-97% Debentures: $487 million debentures issued at $1,000.

-General Reserves $7.50 million

-Preference Share Capital: 2,060.0 million shares issued at $4 per share

-Ordinary Share Capital: 8 million shares issued at $1 per share

The following additional information has been provided by the manager of the company:

-Government bonds are currently yielding 1,244.0% per annum.

-The current market return on equity is estimated to be 10.0% per annum.

- A merchant banker suggests that SPY would have to offer a rate of 9.7% p.a. on any new issue of 11-year debentures.

-Debenture coupons are paid semi-annually, with 11 years to maturity.

-The company tax rate is 13%.

-Preference shares of SPY are currently traded at $6.84 per share

-SPY ordinary shares have recently traded at $11.90 and the company's financial manager believes that a beta of 44.0 is appropriate for the company.

Requirement-A. Using relevant information, estimate the weighted average cost of capital for SPY.

Requirement-B. Using your own words, explain any four relevant factors that can affect the cost of capital.