Question $2$

Mason plc$,$ which pays corporate tax at $30$ per cent, has the following capital structure:

Ordinary shares: $1000000$ ordinary shares of nominal value $25p$ per share. The market value of the shares is $79$ p per share. A dividend of $5p$ per share has just been paid and dividends are expected to grow by $5$ per cent per year for the foreseeable future.

Preference shares: $250000$ preference shares of nominal value $50p$ per share. The market value of the shares is $42p$ per share and the annual net dividend of $7\mathrm{.}5$ per cent has just been paid.

Bonds: $100000$ of $7$ per cent irredeemable bonds with a market price of $102$ per $100$ par.

The annual interest payment has just been made. Calculate the weighted average after$-$tax cost of capital of Mason plc$.$

Question $3$:

The calculation of the WACC is straightforward in theory, but difficult in practice. Outline any possible difficulties that might be experienced when trying to calculate the WACC.