Calculate the WACC

Extract of Balance Sheet for Rio Tinto Issued

Capital ($ million) 28,030,000 Ordinary shares of $83.0 fully paid = $2326.49 million 6,800,000 3.1% Preference Shares of $81.0 fully paid = $550.80 million

Current Liabilities and Provisions Bank Overdraft $93.00million ,Trade Creditors 41.00 ,Unsecured Notes 59.00 ,

Non-Current Liabilities => Debentures $88.00 million Term Loans $67.00 million Mortgage $91.00million

The companys preference and ordinary shares are currently trading at $93.25 each.

The risk-free rate of return is 1.15 % p.a., and the return on the market is 5.5 % p.a.

Debentures have a coupon interest rate of 7.4% p.a. and could be re-issued at the present time at an interest rate of 6.8% p.a. The debentures will be redeemed at their face value in six years time. Face value is as per the balance sheet.

The mortgage loan is repayable in four years time and the current interest rate is 6.45% p.a. The mortgage was initially negotiated at 7.30% p.a.

Term loans have a current interest rate of 6.8% p.a., but were negotiated at an interest rate of 7.2% p.a. They are repayable in full in five years time. The term loans consists of regular semi-annually interest payments with the principal repaid at maturity

The current interest rate on the bank overdraft is 4.20% p.a.

Interest on all debt securities is paid twice-yearly and the corporate tax-rate is 30 percent.