(a)

Supreme Digital Limited has the following information on its share and debt capital:

Equity Capital

The company has in issue 400,000 ordinary shares. It recently announced and paid dividend of GH2.60 per

share. In reaction, the current market price sells at GH14 per share. Dividend growth has been at a steady rate

of 5% in the past years and is expected to continue into the future.

11% Preference Shares

The 12% Preference Shares with 100,000 shares in issue were originally issued at GH1.00 per share. It

currently sells at GH1.50 per share.

Debt Capital

The company issued 200,000 14% Debentures some years ago at GH1.00 per unit. Its current market price is

GH0.90 per unit. They are irredeemable. Assume that the company's corporate income tax rate is 25%.

The management of Supreme Digital Ltd desires to know the cost of capital it should use in appraising its

investments from a pool of funds from the above sources of capital. As a finance expert, you are required to

estimate the weighted average cost of capital (WACC) of Supreme Digital Limited