The preference shares are redeemable in 10 years, or alternatively, are convertible into ordinary shares on a 1 for 1 basis at the option of the shareholder in 5 years time. The company has forecast earnings per share to have risen to R15 per share at thattime, and anticipate that the price earnings ratio will have improved to 10 times. The preference shares were originally issued at a nominal value of R20 000 000, in denominations of R100 per share, and pay a dividend of 20% p.a. If the preference shares are not converted into ordinary shares, they will be redeemed at a premium of 10% over nominal value. Similar preference instruments are currently demanding a return of 15%.

Describe the substantive procedures that the auditors of Rebu should perform to obtain sufficient appropriate audit evidence over the market value of the convertible preference shares as included in the WACC.