Manny Co is a listed company that plans to spend K10m on expanding its existing business. It has been suggested that the money could be raised by issuing 9% loan notes redeemable in ton years' time. Current financial information on Manny Co is as follows. Income statement information for the last year K000 Profit before interest and tax 7.000 Interest (500) Profit before tax 6.500 Tax (1.950) Profit for the period 4.550 KO00 K000 20,000 20,000 40.000 5,000 Balance sheet for the last year Non-current assets Current assets Total assets Equity and liabilities Ordinary shares, par value Retained earnings Total equity 10% loan notes 9% preference shares, par value Total non-current liabilities Current liabilities Total equity and liabilities 27.500 5,000 2.500 7,500 5.000 40.000 The current ex div ordinary share price is K450 per share. An ordinary dividend of K35 per share has just been paid and dividends are expected to increase by 4% per year for the foreseeable future. The current ex civ preference share price is K76. The loan notes are secured on the existing non-current assets of Manny Co and are redeemable at par in eight years' time. They have a current ex interest market price of K105 per 100 loan note. Manny Co pays tax on profits at an annual rate of 30% The expansion of business is expected to increase profit before interest and tax by 12% in the first year. Manny Co has no overdraft. Average sector ratios: Financial gearing: 45% (prior charge capital divided by equity capital on a book value basis) Interest coverage ratio: 12 times Required: (a) Calculate the current weighted average cost of capital of Manny Co. Using Market Values and Book Values (10 marks)