Calculation of cost of capital

The companys CFO has informed the project team that the company plans to raise new capital to fund the investment in the project. The companys current capital structure consists of the following:

Debt : 700,000 7.4% coupon secured notes with five years to maturity. These notes are currently priced at 95% of face value of $100, with half yearly coupon payments.

Equity: 83,300,000 ordinary shares outstanding with a par value of $1 and currently selling for $2.00 per share.

Market: the companys ordinary shares currently have a beta of 1.1, the market risk premium is 7%, and the risk-free rate is 3.5%.

The CFO has indicated that the company would use its investment bank Development Finance to raise all the capital required for the project, should it be approved, consistent with its current capital structure. Moreover, the company would not be able to allocate any retained earnings to the project as these funds are already committed to other projects. Subsequent discussions with Development Finance indicated that the fees associated with raising new capital would be 8% on an issue of ordinary shares, and 4% on new debt issues. Development Finance has specified that these fees cover all direct and indirect issue costs.

Tax rate is 30%

Calculate cost of capital for project?