It is November 2021 and CompanyX has the following capital structure:

 

1) 6.5% redeemable bonds- Par value £100 (redeemable November 2025)

2) 8% irredeemable bonds- Par value £100 

3) Ordinary shares- Nominal value 10p 

4) 7% Preference shares- Nominal Value £1

 

Market Values 

 

5) 6.5% redeemable bonds- £1,000,000 in total with each bond currently priced at £108

6) 8% irredeemable bonds- £2,000,000 in total with each bond currently priced at £115 

7) Ordinary Shares- £4,000,000 in total with each share currently priced at 126p 

8) 7% preference shares- £500,000 in total with each share currently priced at 82p

 

Additional Information

 

 1) The total ordinary share dividend proposed but not paid is 5.5p with an established year on year growth rate of 8%

 2)CompanyX pays corporation tax at 20% 

 

Calculate the individual cost of each of the 4 sources of capital and then the after tax Weighted Average Cost of Capital (WACC) of Company X.