Calculating the WACC.

You are given the following information concerning Karratha Mines:

Debt: 13,000 6.4% coupon bonds outstanding, at $1,000 face value, with 15 years to maturity and a quoted price of $1,070. These bonds pay interest halfyearly. (It will be given that the annual YTM, R D = 5.70%)

Ordinary shares: 345,000 ordinary shares selling for $76.50 per share. The share has a beta of 0.9 and will pay a dividend of $3.80 next year. The dividend is expected to grow by 5% per year indefinitely.

Preference shares: 10,000, 4.4% preference shares selling at $86 per share.

Market: 11% expected return, a riskfree rate of 3.6% and a 30% tax rate.

Calculate the WACC for the firm under a classical tax system and imputation tax system. (Please Assume that the preference and ordinary shares carry 100% franking credits at the 30% tax rate.)