The following information has been extracted from the accounts of Merlin plc:

(i) The 12 per cent bonds are redeemable in five years’ time at par. Annual interest has just been paid. The current ex-interest market price of the bonds is £114.
(ii) The 9 per cent bonds are convertible in three years’ time into 40 ordinary shares of Merlin plc per bond or in four years’ time into 35 ordinary shares per bond. The current ex-interest market price of the convertible bonds is £119 per £100 bond.
(iii) The current ex-dividend market price of the ordinary shares of Merlin is £3.14.
Both dividends and share price are expected to increase by 7 per cent per year for the foreseeable future.
(iv) Corporate tax is at a rate of 30 per cent.

(a) Calculate the cost of debt of the 12 per cent redeemable bonds.

(b) Calculate the cost of debt of the convertible bonds.

(c) If a dividend of 35p per ordinary share has just been paid, calculate the cost of equity.

(d) Calculate the weighted average after-tax cost of capital of Merlin plc.

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Financial position statement as at 30 June 20XX Non-current assets: Current assets: Inventory Accounts receivable Cash Notes 000 000 000 872 240 300 33 573