The following information has been taken from the accounts of Merlin plc:

Notes
(i) The current ex dividend market price of the ordinary shares of Merlin is £3.14. Both dividends and share price are expected to increase by 7 per cent per year for the foreseeable future.
(ii) The 12 per cent bonds are redeemable in five years' time at nominal. Annual interest has just been paid. The current ex-interest market price of the bonds is £114.
(iii) The 9 per cent bonds are convertible in three years' time into 40 ordinary shares of Merlin plc per bond or in four years' time into 35 ordinary shares per bond. The current ex-interest market price of the convertible bonds is £119 per £100 bond. If not converted, the bonds will be redeemed at nominal after four years.
(iv) Corporation tax is at a rate of 30 per cent.
(a) Calculate the cost of debt of the 12 per cent redeemable bonds.
(b) Calculate the cost of debt of the convertible bonds.
(c) If a dividend of 35p per ordinary share has just been paid, calculate the cost of equity.
(d) Calculate the weighted average after-tax cost of capital of Merlin plc.

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Financial position statement at January 20x0 £000 872 £000 Non-current assets Current assets Total assets Equity finance 1,445 Ordinary shares (E1) (i) Reserves 225 150 375 Non-current liabilities 12% bonds (ii) 9% convertible bonds (iii) 500 250 Current liabilities Total liabilities 750 320 1,445