• Empires current capital structure consists of the following:
• 5 000 000 ordinary shares of $1 each, currently trading at $50 on stock market
• The ordinary shareholders require a premium of 12.2% in addition to the risk free rate to compensate them for taking on the risk of investing in the company
• 1 000 000 10% redeemable in 5 years preference shares (paid annually) of $1 each, currently trading at $1.50
• 50 000 8% debentures (paid annually) currently trading at $80 each, with a nominal value of $100 redeemable in 5 years
• The company tax rate is 30%
• The return on government bonds is 9.2% at present
• Calculate Empires weighted average cost of capital (WACC) using the information provided in the above scenario only