3. Long term capital structure of company KL is given below:

Sources of capital Book value ($ 000)

Debts 20,000

Preferred stock 5,000

Common stock 7,500

Reserves (re) 17,500

Total capital 50,000

The interest rate for debt is overall 10%, dividend for common stock is $1.3 and $1.5 for preferred stock per share, respectively. Preferred -and stock price is $10 per share, growth rate is 0.06. Suppose that the average income tax ratio is 25 % and the corporate tax ratio is 20 %, calculate and interpret the WACC of the Company.