a$)$Given the following information, calculate the company$$s weighted

average cost of capital $($WACC$).$

Dividend per share, d$0=5$p

Price per share, P$0=88$p cumulative dividends

Growth rate in dividends, g $=0\mathrm{.}07$

$24$ million shares in issue

$25$ million, $15\%$ irredeemable debt whose price is $110$ excluding

interest

$10$ million $12\%$ irredeemable debt, unquoted $($privately issued$).$

$3$ million, $7$ year bank loan at $4\%$ above base

Bank base rate $=10\%$

Corporation tax $=35\%$

b$)$ What assumptions underlie the use of the weighted average cost of

capital as a discount rate?