Seal (BPP kit amended question)

Extended part:

Nominal cost of capital given as 10%

seal island is considering conversion of convertible loan stock.
the convertible is a $20 million 8% loan stock with 4 years maturity and current market price is $110. The LS may be converted into 20 ordinary shares. other debt of company is MV. $23 M

COST OF DEBT IS 9% (already given)

current sp is $5.2 with total mv. of $180m

and financial gearing mv equity 80% debt 20%

systematic risk of company same as market. market return is 15% tax 30%

My Solution:

now here i dont understand two things.
1)one is the cost of equity can be found out in two ways. one is with 10% as wacc using the MV weights80/20 as given. this gives cost of equity as around 10.9% say 11%
second way is to take 15% as cost of equity straight up.
why in the solution have they used 15%? will 11% be acceptable as well?

2)they have clearly given the current MV of loan stock at $110 but have still found out the discounted value like we do in regular debenture sums. why? am i missing something here?

any help would be greatly appreciated! thank you in advance!!!!