The management of Benso Oil Palm Ltd is consider raising additional capital for possible expansion into the West African Sub region. However, many of the institutional shareholders are concerned about the potential impact of additional finance on the company. Before the Board will approve managements proposal, there is the need to assess the current capital structure and the associated cost. The Board of Benso has requested for information on the current cost of financing of the company. As head of the finance team, the chief executive officer has also requested that you furnish him with the needed information requested by the board. You have been provided you with the following information about Benso Oil Palm Ltd as at 31st December 2021:

i. Issued share capital of Benso Oil Palm Ltd is GHS500 million and it comprises with 1,250,000 ordinary shares. Benso Oil Palm Ltd is a quoted company, and its current share price is GHS250. The dividend paid for the current year was GHS50 per share and a beta of 1.5. Given the adverse impact of Covid-19, dividends are expected to decline at an annual rate of 8%.

ii. The retained earnings of Benso were GHS100 million.

iii. Benso Oil Palm Ltd has issued irredeemable preference shares for a value of GHS150 million. This consists of 625,000 preference shares. Total annual dividend to preference shareholders is 12.5%. The last traded price of a preference share was GHS250.

iv. Irredeemable, non-quoted long-term borrowings of Benso Oil Palm Ltd were GHS150 million with annual real interest rate of 21%. The market value of its debt stock, which is not redeemable, is currently valued at GHS 175 million. The company pays income tax at the rate of 30% per annum on its profits, with inflation estimated at 3% per annum.

The following information is worth noting: the return on the GSE All share index as of 31st December 2021 was 18% while the government of Ghana one-year note traded at a rate of 8%.

You are required to estimate the following:

a). Any capital gain or loss on the share price of Benso as of 31st December 2021

b). Cost of ordinary share capital using the dividend growth model.

c). Cost of preference share capital.

d) Nominal cost of debt

e) Weighted average cost of capital (WACC) at market values with reference to (b d)

f) Considering the equity beta of the company, explain the impact of any changes on the stock of Benso in relation to changes in market conditions.

g). The companys cost of equity using the capital asset pricing model. [2 marks] h). The WACC of Benso at Book Value with data from (c), (d) and (g) estimates.