Strummer plc is calculating its current weighted average cost of capital on both a book value and a market value basis. You have the following information:

1. The current dividend, shortly to be paid, is 23p per share. Dividends in the future are expected to grow at a rate of 7 per cent per year.

2. Corporation tax is currently 19 per cent.

3. The interest rate on bank borrowings is currently 6 per cent. 4 Year-end market prices (all ex-dividend or ex interest):

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Year-end financial position statement £000 33,344 15,345 6,400 7,200 9,000 Non-current assets Current assets Ordinary shares (50p nominal value) Reserves 8% preference shares (£1 nominal value) Long-term liabilities 5% bonds (redeemable in 6 years) 8% irredeemable bonds Bank loans Current liabilities 4,650 8,500 3,260 £000 48,689 22,600 16,410 9,679 48,689