Calet plc, which pays corporate tax at 30 per cent, has the following capital structure:

■ Ordinary shares: 1 000 000 ordinary shares of nominal value 25p per share. The market value of the shares is 79p per share. A dividend of 6p per share has just been paid and dividends are expected to grow by 5 per cent per year for the foreseeable future.

■ Preference shares: 250 000 preference shares of nominal value 50p per share.

The market value of the shares is 42p per share and the annual net dividend of 7.5 per cent has just been paid.

■ Bonds: £100 000 of 7 per cent irredeemable bonds with a market price of £102 per £100 par. The annual interest payment has just been made.

Calculate the weighted average after-tax cost of capital of Calet plc.

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