Berlan plc Berlan plc has annual earnings before interest and tax of 15 million. These earnings are expected to remain constant. The market price of the company's ordinary shares is 86 pence per share cum dividend and of debentures 105.50 per debenture ex interest. An interim dividend of six pence per share has been declared. Corporate tax is at the rate of 35% and all available earnings are distributed as dividends. Berlan's long-term capital structure is shown below: 000 Ordinary shares (25 pence par value) 12,500 Reserves 24,300 36,800 16% debenture 31.12 X4 (100 par value) 23,697 60,497 Required: (a) Calculate the cost of capital of Berlan plc according to the traditional theory of capital structure. Assume that it is now 31 December 20X1