QUESTION ONE [32]

SteelCo Limited has the following capital structure:

Capital structureDetailsMarketPrice

Equity2 500 0000 R2 ordinary sharesR2,5

Preference Shares1 500 000 12% R1 preference shares R1,2

ReservesR2 500 000NA

Bank loanR300 000 15%NA

DebenturesR1 250 000 16%R150 (issued at R100)

The current and expected future rate of ordinary share dividend is 25%. Assume a tax rate of 30%.

What is the company's weighted average cost of capital? (32)