Question 2 The current capital structure of Blend Co is as follows: $'000 Ordinary shares 8,000
Preference shares 2,000
Long-term loans 2,000

(a) The after-tax cost of debt is 5%, cost of preference shares and ordinary shares are 8% and 15%, respectively. Compute Blend Co's WACC under the current capital structure.

(b) After reviewing the company's operations and growth plan, Blend Co decided to change its capital structure by issuing bonds at market value of $10 million. The before-tax required rate of return for these bonds is 6% and the company's tax rate is 10%. Required Compute the new WACC. (Hint: The cost of ordinary shares, preferences shares, loans and bonds should be weighted separately.] "

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity. calculate the cost of new stock using the dividend growth approach. what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics. each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings. equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g