You are working on the budget process for The Potemkin Group. The following information is extracted from the Financial Statements of the Potemkin Group: '000 Ordinary Shares (2) 62,000 Retained Earnings 96,400 6% Preference Shares (3) 24,000 5.8% Redeemable Debentures 70,000 252,400 As part of the budgeting process your team is tasked with calculating the Weighted Average Cost of Capital (WACC) that will be used in a five-year plan. The ordinary shares are currently quoted on the National Stock Market at 12.30 - ex dividend - per share. An ordinary dividend of 0.50 per share has been announced by the board and is scheduled to be paid next week. The board has also announced that it expects to grow Ordinary dividends by 4% per annum for the foreseeable future. The Preference shares are currently trading at 4.65 per share. Dividends were paid within the last quarter. The 5.8% Debenture is redeemable at par in 5 years' time. The Debentures are trading at 98.80 ex-interest. The Potemkin Group pays a Corporation Tax rate of 15%. The Potemkin Group's Banking partner will provide short term loans at 12.75%, and the inflation rate in the economy is 5.5%. Required a. Calculate the current cost of each type of finance in the company's capital structure. (40 marks) b. Calculate the weighted Average Cost of Capital (WACC) of The Potemkin Group. (24 marks) c. Evaluate how The Potemkin Group could make changes to its WACC. (8 marks) d. Discuss the return provided to capital providers calculated in (a) above, with reference to the nominal interest rate and the general inflation rate. (28 marks) You are working on the budget process for The Potemkin Group. The following information is extracted from the Financial Statements of the Potemkin Group: '000 Ordinary Shares (2) 62,000 Retained Earnings 96,400 6% Preference Shares (3) 24,000 5.8% Redeemable Debentures 70,000 252,400 As part of the budgeting process your team is tasked with calculating the Weighted Average Cost of Capital (WACC) that will be used in a five-year plan. The ordinary shares are currently quoted on the National Stock Market at 12.30 - ex dividend - per share. An ordinary dividend of 0.50 per share has been announced by the board and is scheduled to be paid next week. The board has also announced that it expects to grow Ordinary dividends by 4% per annum for the foreseeable future. The Preference shares are currently trading at 4.65 per share. Dividends were paid within the last quarter. The 5.8% Debenture is redeemable at par in 5 years' time. The Debentures are trading at 98.80 ex-interest. The Potemkin Group pays a Corporation Tax rate of 15%. The Potemkin Group's Banking partner will provide short term loans at 12.75%, and the inflation rate in the economy is 5.5%. Required a. Calculate the current cost of each type of finance in the company's capital structure. (40 marks) b. Calculate the weighted Average Cost of Capital (WACC) of The Potemkin Group. (24 marks) c. Evaluate how The Potemkin Group could make changes to its WACC. (8 marks) d. Discuss the return provided to capital providers calculated in (a) above, with reference to the nominal interest rate and the general inflation rate. (28 marks)