The company has 50 million ordinary shares in issue which are currently trading at 620p, the recently declared final dividend of 20p. The beta value of the shares is 0.9, the proxy for the risk free rate is 1% and the proxy for the expected return on the market portfolio is 8%.

The company also has 100 million of 5% bonds in issue which are currently trading at 114.50 cumulative-interest per 100 nominal. The last annual interest payment was made 6 months ago and they are redeemable at par in exactly 9 years.

The companys marginal rate of corporation tax is 20% and payments and rebates are subject to a one year delay.

Estimate the weighted average cost of capital of the company and explain whether this can be used as the discount rate to appraise the expansion projects.