ABC (Pty) (Ltd) has 1 000 000 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 17.80%. 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 5 000 000,00

300 000 Irredeemable 15% preferences shares 2 000 000,00

Long term loans 1 000 000,00

Bank overdraft 300 000,00

Required

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