(b) Hacker Ltd. has the following capital structure:

5,000,000 $2 fully paid ordinary shares $10,000,000

Retained earnings $ 1,111,111

5 % preference shares $2 fully paid $ 200,000

10% mortgage $ 300,000

Cost of Each Source of Funds

COST OF CAPITAL

Ordinary shares 8% $2.90 per share

Preference shares 4.8% $2.60 per share

Mortgage 7.0% after-tax Not available Required:

Calculate the Weighted Average Cost of Capital.

Show separate calculations for ordinary shares and retained earnings. Proportions and weighted calculations to four decimal places. Final answer to two decimal places.