The management of Octopus Limited, a manufacturing entity, is considering a new investment opportunity that requires information about the current cost of capital of the company. The capital structure of Octopus Limited is as follows:

o $4$ million ordinary shares with par value of $50$ cents each, currently trading at R$5\mathrm{.}00$ per share. The company has a beta of $1\mathrm{.}6,$ a risk free rate of $9\%$ and a return on the market of $17\%.$

o $1\mathrm{.}5$ million $13\%,$ R$2$ preference shares, with a market value of R$3\mathrm{.}50$ per share.

o R$3$ million $11\%,$ debentures due in $5$ years with a current yield$-$to$-$maturity of $8\%.$

o R$90000016\%,$ Bank loan, due in December $2025.$

Additional information:

$$ Octopus Limited has maintained a dividend growth rate of $12\%$ per annum over the past $5$ years. The latest dividend paid was $100$ cents per share.

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

Required:

$1\mathrm{.}1.$ Calculate the weighted average cost of capital $($WACC$)$ of Octopus Limited. Use the Capital Asset Pricing Model to calculate the cost of equity. $(12)$

$1\mathrm{.}2.$ Calculate the weighted average cost of capital $($WACC$)$ of Octopus Limited. Use the Gordon Growth Model to calculate the cost of equity. $(3)$