YSpace plc is a company listed in the London Stock Exchange. Its accounting information has just been released and the balance sheet is summarized below: YSpace Fixed assets Current assets Liabilities Net asset Inventories 170 Trade receivables 110 Cash 20x1 (Em) 140 370 Trade payables due within one year (200) Debenture due after more than one year (100) 210 The number of shares in issuance for YSpace is 300 million. It is estimated that the beta for YSpace is 1.3 over the past five years. The risk-free return is currently 6.5% and the risk premium for equities over the risk-free asset has averaged 5% per annum. The debenture that YSpace hold was issued at a par value of 100 five years ago and it will mature within two years. It is the only liabilities relevant to the WACC calculation. The debenture pays a coupon of 8% per year and it is currently trading in the second market at a price of 97. The tax rate of the company is 30%. The dividend in 20x8 has just been paid and the dividends history is showed in the following table: Required: Dividend History Dividend per share 20x1 20x2 20x3 20x4 20x5 20x6 20x7 20x8 5 6 6.2 7 7.5 8 8.5 9.2 (pence) (a) Use the dividend valuation model to calculate the value for one share in YSpace assuming that future dividend growth will be the same as the average rate for recent years. (5 marks) (b) Calculate the weighted average cost of capital (WACC) for YSpace on the assumptions that the share price calculated above is the market share price. (10 marks) Explain why a project should not be evaluated using the cost of finance associated with the latest portion of capital raised