Part (a) Kaydon plc (Kaydon) is a large manufacturing company which is listed on a major stock exchange. It is financed by ordinary share capital and redeemable debentures. It has 50 million ordinary shares in issue which are trading at \&4.15. The debentures have a nominal value of 100 each and 120 million in total. They will be redeemed at par in six years' time. The debentures are currently trading at 892.00 per 100 nominal and have a coupon rate of 5%. Ordinary shareholders receive dividends each year and the annual dividend growth rate is 5% per annum. A dividend has just been paid of 46.00 pence per share. Kaydon pays corporation tax on its taxable profits at an average rate of 20% and you should assume this will continue for the foreseeable future. Required: Calculate the weighted average cost of capital (WACC) for Kaydon. Conclude your answer with an explanation of the WACC and what it would be used for. (12 marks) Part (b) The board of Kaydon has decided to raise 16 million of new funds by issuing 27 million 15.1% irredeemable preference shares. The preference shares will have a nominal value of E0.50. Several directors have expressed concern that such an issue would have a significant impact on the company's weighted average cost of capital. (i) Explain how the issue of additional capital, such as preference shares, could impact on a company's weighted average cost of capital. (6 marks) (ii) Discuss whether the issue of preference share capital is likely to have a significant impact on Kaydon's weighted average cost of capital. Include a calculation of the prospective cost of the preference share capital but do NOT recalculate the weighted average cost of capital. (8 marks) (iii) Briefly explain the role that pension funds and brokers may fulfil with regards the issue of new capital by Kaydon. (4 marks)