Riphean plc and Silurian plc are two businesses operating in different industries. They are

both financed by a mixture of ordinary share and loan capital and both are seeking to derive

the cost of capital for investment decision$-$making purposes. The following information is

available concerning the two businesses for the year to $30$ November Year $8$:

Riphean plc Silurian plc

Profit for the year $3\mathrm{.}0$m $4\mathrm{.}0$m

Dividends $1\mathrm{.}5$m $2\mathrm{.}0$m

Market value per ordinary share $4\mathrm{.}001\mathrm{.}60$

Number of ordinary shares $5$m $10$m

Gross interest yield on loan capital $8\%12\%$

Market value of loan capital $10$m $16$m