1. You have recently been appointed as the finance director of Hamilton plc and are due to meet with your fellow directors to discuss the company's capital investment plans. You have gathered the following information: Company details The company has 50 million ordinary shares in issue which are currently trading at 4.30. The final dividend for the year ended 30th September 2018 was recently declared as 15p and is due to be paid next week. The company's total annual dividends over the past 6 years are as follows: 2013 Year ended 30th September Total dividend per share 2014 2015 2016 2017 2018 16p 17p 19p 20p 15p 18p The company also has 100 million of 8% bonds in issue which are currently trading at 112 ex-interest per 100 nominal. The annual interest on these bonds was paid yesterday and they are redeemable at par in exactly twelve years. The company's marginal rate of corporation tax is 20% and there have been no redemptions or new issues of shares in the past six years. Capital investment project details The company has spent 30,000 over the past year developing a new product which is deemed to have a similar risk to its existing product range. New equipment costing 300,000 will be required to launch the product and, whilst this can be funded from existing resources, it will not qualify for capital allowances. The new product is forecast to generate an annual pre-tax profit of 21,000 for ten years. This forecast is stated in money terms and includes depreciation calculated on a straight-line basis to the equipment's anticipated residual value of 30,000 and interest calculated at 4% of the initial investment Corporation tax payments and rebates are subject to a one year delay. You have also been informed that the board of directors has historically only invested in new products which have an accounting rate of return of at least 25% on the average investment basis. Required: a) Calculate the company's current weighted average cost of capital using market values. (14 marks)