help cant find kd@ cost of loan stock

Countrylife Co is a listed company that owns and operates a large number of farms
throughout Europe. A variety of crops are grown.
The following is an extract from the statement of financial position of Countrylife Co
at 30 June 20X8:
€ million
Ordinary shares of €1 each 300
Reserves 150
9% irredeemable €1 preference shares 100
8% loan stock 20X9 400
–––
950
–––

The ordinary shares were quoted at €2.50 per share ex div on 30 June 20X8. The beta
of Countrylife Co’s equity shares is 0.85, the annual yield on treasury bills is 5.5% and
the financial markets expect an average return of 17% on the market index.
The market price per preference share was €0.80 ex div on 30 June 20X8.
Loan stock interest is paid annually in arrears and is allowable for tax at a corporation
tax rate of 30%. The loan stock was priced at €98.62 ex interest per €100 nominal on
30 June 20X8. Loan stock is redeemable at par on 30 June 20X9.
Assume that taxation is payable at the end of the year in which taxable profits arise.
Difficult trading conditions in European farming have caused Countrylife Co to decide
to convert a number of its farms in Southern Europe into camping sites with effect
from the 20X9 holiday season. Providing the necessary facilities for campers will
require major investment, and this will be financed by a new issue of loan stock. The
returns on the new campsite business are likely to have a very low correlation with
those of the existing farming business.