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You have been provided with the following information on C-B P/L which has the following...

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Finance

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You have been provided with the following information on C-B P/L which has the following on its books; Book value Market value Cost of Capital (After-tax cost) Long-term debt Ordinary equity Preference capital $ 750,000 $ 450,000 $ 300,000 $780,000 $600,000 $400,000 6.8% 8.4% a) What is the WACC % (using the BV weights)? (4 marks) b) What is the cost of capital and what is the role that it plays in making long-term investment decisions? (4 marks) c) Why is the cost of equity higher than long or short-term debt? (2 marks)

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