Using the information below calculate the weighted average cost of capital (WACC), using the Capital Asset Pricing Model (CAPM) to calculate the cost of equity. (17) Mogul Moulders is a manufacturing company. They need to replace some of their older equipment to improve service delivery and reduce costs. As a management accountant, you have been tasked to calculate their cost of capital.

The following information is presented to you in respect to the company’s capital structure:

• 2.5 million R2 ordinary shares, currently trading at R4 per share.

• 1 million 12% R2 preference shares, currently trading at R1.50 per share

• A bank loan of R800 000 at 16% interest per annum, payable in 8 years.

Additional information:

• The company has a beta factor of 1.4 and a risk free rate of 6%.

• Its tax rate is 30% and the return on market is 15%.

• The current dividend paid on the ordinary shares is 80 cents per share and a growth rate of 13% is maintained.