1) Lamda plc. Has the following financial information regarding financing and its costs.
Book Value (£)
3,000,000- Long term debt
10,000,000- short term debt
7,000,000- ordinary shares
20,000,000- total book value

Market Value (£)
3,000,000- long term debt
9,000,000- short term debt
23,000,000- ordinary shares
35,000,000- total market value

Cost of debt or
equity (%)
4.0- long term debt
7.3- short term debt
15.0- ordinary shares

The company is in the 25% corporate tax bracket. They also have a target debt to equity
ratio of 2/3.

A) what is the weighted average of capital
b) What are the company's weights for debt and equity using the company's target
capital structure (debt/equity ratio)?
c) Assuming that the company only has the long term debt in this instance, then using
the target weighting for D/E from part (b), what is the WACC?