Q4. Long term capital structure of company KL is given below: Sources of capital Book value ($ 000) Debts 60,000 Preferred stock 15,000 Common stock 17,500 37,500 Retained earnings The overall interest rate is 10%, the dividend for common stock is $1.4 per share and $1.5 for preferred stock per share, The preferred stock price is $20/share and common stocks are currently trading for $18/share. Net income of the Company is expected to be paid out 40% as dividend and 60% will be added to the retained earnings. The IRR of the company is 15%. The corporate tax rate and average income tax rate are 20% and 25 % respectively. Calculate and interpret the WACC of the Company