Ordinary shares, (par value $0.50) $100m

10% loan notes ($1000 par) $100m

10% bank loan $200m

The 10% loan notes are redeemable (at par) in five years time. Their current ex-interest market price is $1200 (per $1000 loan note). Trix Inc. pays tax on profits at an annual rate of 30%. The market price of the companys ordinary shares is currently $4.00.

Trix Inc. equity beta is estimated to be 1.5. The systematic risk of debt may be assumed to be zero. The risk free rate is 6.5% and the market return 12%

a) Calculate the current weighted average cost of capital of Trix Inc.

(No dividend growth model needed)