. (20 marks-weighted evenly) You are given the following information about ABC Ltd.

The company has ordinary shares in issue that have a current market value of 2.25 per share. The annual dividend to be paid by the business in future years is expected to be 40p per share and expected to increase at the rate of 5% per annum.

The company has irredeemable loan capital outstanding on which it pays an annual rate of interest of 10%. The current market value of the loan capital is 112 per 100 value and the corporation tax is 30%.

The company has 12% preference shares in issue with a nominal (par) value of 1. The preference shares have a current market price of 0.85

The long-term capital structure of the company is made up of 40% ordinary shares, 40% loan capital and 20% preference shares.

Required

What is the weighted average cost of capital for the company (20 marks)