Hazelwood plc is financed by:

(a) 1 million ordinary shares (nominal value £1 each). These are expected to yield a dividend of £0.10 per share in one year’s time. Dividends are expected to grow by 10 per cent of the previous year’s dividend each year. The current market price of the share is £1.80 each; and

(b) £800,000 (nominal) loan notes. These will pay interest at the end of each year of 9.625 per cent (of nominal) for three years. After this the loan notes will be redeemed at their nominal value. Currently the loan notes are quoted in the capital market at £95 (per £100 nominal).

Assume that the corporation tax rate is 20 per cent.

What is the business’s WACC?