Question

A company has a source of funding consisting of bonds, preferred shares, and common stock with the following characteristics.

a. Bonds

nominal bonds of Rp1,500 per sheet, with a market price of Rp1,750, a 7-year term and a coupon of 11%. The bond issuance fee is Rp50 per sheet.

b. Preferred shares

Each preferred stock has a nominal value of Rp10,000 per share sold for Rp9,800 with a dividend of 8% and an emission fee of Rp50 per sheet.

c. Ordinary shares

the company has a nominal ordinary stock of Rp1,250 per sheet. Currently, the stock price is sold at Rp1,300. Last year, the firm recorded an ROE of 18% and the company consistently shared a dividend of 60% of profits earned in the current year. The last dividend paid is Rp75 per sheet. Meanwhile, the cost of stock emissions is Rp50 per sheet.

The Company stipulates that the composition of the company's capital structure consists of 25% of the bond, 60% of the ordinary stock, and the remaining preferred stock. If the tax rate is 25%, calculate the total weighted average cost of capital (WACC) of the company!