8.4 Consider each of the following: Mallard plc issues loan capital with a nominal value of 100 million at a price of 90 per 100 nominal value. The annual interest rate is 10 per cent of the nominal capital. The loan capital will be redeemed in two years' time at 110 per 100 nominal value. The effective rate of corporation tax for the business is 30 per cent. Napa plc has 100 million 0.25 ordinary shares in issue with a current market value of 1.20 per share. The cost of ordinary shares is estimated at 12 per cent. The business also has 6 per cent irredeemable loan notes in issue with a nominal value of 75 million. These are currently quoted at 80 per 100 nominal value. The tax rate is 20 per cent. Attis plc has reported pre-tax profits of 48 million and after-tax profits of 32 million for the year that has just ended. The business expects profits to increase by a further 25 per cent in the forthcoming year and then to stabilise at this figure. The business has 80 million 0.50 ordinary shares in issue and the market capitalisation of the business is 320 million. The dividend cover ratio of the business is held at a constant 2.5 times. Required: (a) For Mallard plc, what is the net cost of the loan capital (to the nearest per cent) to the business? (b) For Napa plc, what is the weighted average cost of capital of the business? (c) For Attis plc, what is the cost of the ordinary shares? (d) How might employees respond where they believe their business is burdened with excessively high levels of borrowing