ABC (Pty) Ltd has 1000 000 shares in issue and is currently paying a dividend of R5 per share with a growth of 5%. The shareholders required rate of return is 24%. The preference shares have no conversion rights and carry a preference dividend pay out ratio of 15%. Similar preference shares are currently trading at 11%. The long term loan matures in ten years time and carries an interest rate of 17.00%. The current long term interest rate for a similar loan is 17.8%. The bank overdraft rate is 22% and the tax rate is 27%

EXTRACT FROM THE STATEMENT OF FINANCIAL POSITION OF ABC (PTY) LTD

Ordinary shares. 5000 000.00

300 000irredeemable 15%preferences shares. 2000 000.00

Long term loans. 1000 000.00

Bank overdraft. 300 000.00

8300 000.00

Required:

Calculate the weighted average cost of the capital (WACC) at market value.