Drive Corporation has recently invented a radically new type of car that is able to run solely on water. This financing for this development and prototype stages came from the companys own resources. Initial market research has indicated that the demand for this type of car will be significant and a large amount of capital will be required to make the car commercially viable. Currently, Drive Corporation is financed by: 1.25 million ordinary shares (nominal value 1 each), which are expected to yield a dividend of 0.10 per share in one year's time. Dividends are expected to grow by 8% of the previous year's dividend each year. The current ex- dividend market price of the share is 1.80 each. 2,000,000 (nominal value) loan stock, on which interest is paid at the end of each year at 9% of the nominal value for three years, after which the loan stock is redeemed at nominal value. Currently the loan stock is quoted on the capital market at 85 per 100 nominal value and the current rate of corporation tax is 30% and you are required to: a. Calculate the WACC of Drive Corporation. b. Discuss the Pecking Order Theory of capital structure. c. Discuss MM Proposition 1 which states that The market value of any firm is independent of its capital structure or: Financial leverage has no effect on shareholders wealth.