The summarised statement of financial position of D plc. at 30 June 20X9 was as follows: K000 K000 Fixed assets 15,350 Current assets 5,900 Current liabilities (2,600) Net current assets 3,300 9% debentures (8,000) 10,650 Ordinary share capital (25 ngwee shares) 2,000 7% preference shares (K1 shares) 1,000 Share premium account 1,100 Retained profit 6,550 10,650 The current price of the ordinary shares is K1.35 ex dividend. The dividend of 10 ngwee is payable in the next few days. The expected rate of growth of the dividend is 9% per annum. The current price of the preference shares is 77 ngwee and the dividend has recently been paid. The debenture interest has also been paid recently and the debentures are currently trading at K80 per K100 nominal. Assume that D plc. issued the debentures one year ago to finance a new investment. Ignore corporation tax. (a) Calculate the gearing ratio for D plc. using market values (4 Marks) (b) Calculate the cost of ordinary share capital, the cost of preference share capital, and the cost of debentures. (6 Marks) (c) If the capital asset pricing model (CAPM) were to be used to calculate the cost of ordinary share capital for D plc., state the three (3) pieces of data needed. (3 Marks) 3 (d) Calculate the companys weighted average cost of capital (WACC) using respective market values as weighting factors. (8 Marks) (e) Give any four (4) reasons why D plc may have issued debentures rather than preference shares to raise the required finance. (4 Marks) TOTAL = 25 Marks

From the data given in that question.we were not suppose to calculate cost of Equity as per CAMP but Using Capitalization.