Mori PLC has in issue 1,000 bonds which mature in 4 years time. The bonds par value is 1,000 each and it pays 8% interest per year. The cost of debt is 9%.

The company has just paid a dividend of 1.2 per share. Dividends are expected to grow at 4% for a foreseeable future. The company has 1 million shares outstanding, at nominal value of 1 per share. The cost of equity is 14%.

The marginal tax rate is 35%.

Required:

1. Estimate the total market value of the bonds in issue. (5 marks)
2. Estimate the total market value of the outstanding shares. (5 marks)
3. Calculate the weighted average cost of capital. (5 marks)