Question
PharmaCure Bangladesh Ltd., a leading pharmaceutical company, is considering financing for its research and development initiatives. The company has issued 20,000 bonds to the public
PharmaCure Bangladesh Ltd., a leading pharmaceutical company, is considering financing for its research and development initiatives. The company has issued 20,000 bonds to the public with an annual coupon rate of 8%, maturing in 10 years. Each bond has a face value of BDT 500 and is currently trading at BDT 525. Additionally, the company has 150,000 shares of preferred stock available for investors. The preferred stock pays an annual dividend of BDT 2.50 per share and is currently traded at BDT 25 per share. Furthermore, there are 800,000 shares of common stock in circulation, valued at BDT 30 per share. The beta of these common shares is 1.2, reflecting their market risk. In the financial environment of Bangladesh, the risk-free rate is 5.5%, and the expected market return is 10%. The market value of the company's retained earnings is BDT 2,500,000, with an estimated cost of 14%.
Considering a corporate tax rate of 25%, calculate the Weighted Average Cost of Capital (WACC) of PharmaCure Bangladesh Ltd.
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