As-you-like-it (Ltd) is a company listed on the stock exchange and seeking investment opportunities in sub-Saharan Africa. The company capital structure consists of ordinary shares and a 10-year loan obtained from a bank. Government bonds are currently trading at 6% and the market risk premium is 4%.

Additional information is provided for you:

The beta of As-you-like-it (Ltd) is 1.25;

As-you-like-it (Ltd) has just paid a dividend of R1.50 per share;

The cost of debt before tax is 9%, with a market value of R3-million;

The tax rate is 28%;

Profits for As-you-like-it (Ltd) are growing consistently at 5% per year; and

The company has 200,000 ordinary shares in issue.

QUESTION:

From the scenario above, what is the weighted average cost of capital and how does it compare to the market returns?