Akwanuasah Limited is a firm which is into furniture production. The firm has the following capital structure Equity share capital of $10 each $600,000 15% preference share capital of $100 each $150,000 Retain earnings $200,000 12% debenture of $100 each $150,000 10% term loan $150,000

Note

i. The current market price of equity share is $30. The dividend per share is $4 which has an expected annual growth rate of 8%. ii. The current market price of preference share is $120 and it is redeemable after 10 years with 10% premium. iii. The debenture is traded at a market price of $100 and redeemable after 5 years with 10% premium. iv. The applicable tax rate is 30%.

Calculate the weighted average cost of capital using a) The book value as weight. b) The market value as weight.