Practice Questions Paper F9 December 2015. I need the solutions.

(a) Blue plc is equity financed by 500,000 50c ordinary shares. Current market value is 30c and the annual
dividend of $12,000 is about to be paid.
Calculate Blue’s cost of capital.
(b) Red plc is financed by equity shares having a market value of $3. A dividend of 25c has just been paid
and this compares favourably with the dividend of 15c paid four years ago.
Calculate Red’s cost of capital.
(c) White plc is financed by 400,000 $1 ordinary shares and $600,000 12% debentures. The market values
are $1.40 ex div and $90% respectively. A dividend of 14c has just been paid and dividends have been
growing at 6% p.a. Interest is shortly to be paid on the debentures which are redeemable at a 5% premium
in 6 years time.
Ignoring taxation calculate White’s cost of capital.
(d) Yellow plc is financed by 1 million 50c ordinary shares, market value $1.30 and $500,000 5% debentures
valued at $95%. A dividend of 15c is about to be paid and dividends have always been constant. Interest
on the debentures is soon to be paid and redemption is at par in 5 years time.
If corporation tax is at 35% calculate Yellow’s cost of capital.