The following information has been taken from the statement of financial position of Cos plc (Cos), a HK listed company:

	HK$ m
Equity and Reserves
Ordinary shares	15
Reserves	29
	44
6% preference shares	6
	50
Non-current Liabilities
4% Redeemable Bonds	18
Current Liabilities
Trade and other creditors	12
Total Equity and liabilities	80

The ordinary shares of Cos have a nominal value of HK$5 per share and a current market price of HK$31 per share.

The 6% preference shares of Cos have a nominal value of HK$10 per share and a current market price of HK$12 per share.

The bonds have a nominal value of HK$1000 and a current market price of HK$1035. They were issued seven years ago at a low coupon rate of 4% and are redeemable in three years time at a 10% premium to the nominal value.

The risk-free rate of return is 3.5% per annum and the equity risk premium is 6.8% per annum. Cos has an equity beta of 1.25.

Cos pays corporation tax at a rate of 20% per annum.

Required:

1. Calculate the after-tax Weighted Average cost of Capital (WACC) of Cos. You must state all assumptions and show all workings

2. From a theoretical basis discuss when it would be correct to use the WACC in appraising future projects.

3. Describe the key features of any two of the sources of long-term finance used by Cos.