4. Big plc is a holding company owing shares in various subsidiary companies. Its directors are currently considering several projects which will increase the range of the business activities undertaken by Big and its subsidiaries. The directors would like to use discounted cash flow techniques in their evaluation of these projects, but as yet no weighted average cost of capital has been calculated. Big plc has an authorised share capital of 10 million 25p ordinary shares, of which 8 million have been issued. The current ex dividend market price per ordinary share is 1.10, a dividend of 10p per share having been paid recently. The company's project analyst has calculated that 18% is the most appropriate after-tax cost of equity capital. Extracts from the latest balance sheets for both the group and the holding company are given below. Big and Subsidiaries '000 Big plc '000 Issued share capital 2,000 2,000 Share premium 1,960 1,960 Reserves 3,745 708 7,705 4,668 Total shareholders' funds Minority interests 895 1,400 3% Irredeemable debentures 9% Redeemable debentures 1,500 1,500 Bank loans 1,540 600 Total long term liabilities 4,440 2,100 Interest on every type of debt is payable annually and all the current year's interest payments will be made very shortly. The current cum interest market prices for 100 nominal value debentures are 31.60 and 103.26 for 3% and 9% debentures respectively. The 9% debenture is redeemable at par in ten year's time. The bank loans bear interest at 2% above base rate (which is currently 11%) and are repayable in six years. The effective corporation tax rate faced by Big plc is 46%. There is no personal taxation. Calculate: The effective after-tax weighted average cost of capital as required by the directors