Norman Plc has the following sources of long-term capital:

1. 20 million 1 Ordinary Shares with a market value of 3.50 per share. A dividend of 0.30 per share has just been paid and are expected to grow at 5% per annum.
2. 8 million irredeemable 1 Preference Shares with a market value of 92p. The annual dividend is 0.38 per share.
3. 32 million of irredeemable Debenture Stock with a market value of 80 for each 100 nominal value with an annual interest rate of 9%. Current corporation tax is 25%.

Required:

1. Calculate the cost of capital for ordinary shares, preference shares and the debenture loan stock.
2. Calculate the Weighted Average Cost of Capital from the above information.

c. Discuss the theory of Modigliani and Miller in relation to WACC in a world with no tax compared to their later theory where tax is acknowledged. (You may find the use of diagrams could help illustrate your discussion).