Weighted Average Cost of Capital (WACC) Carlton Ltd is a property development company operating in the area. The company has the following capital structure as at 31st October 2014. Additional Information: The ordinary shares are currently trading at exist2.80 while the Preference shares are trading at exist3.00. Return on government bonds is 4%, the market risk premium 6%. A consultant has estimated the company to have a beta of 1.25. Corporate tax rate is 35% The bonds originally had a 3 year term to maturity and were issued exactly two years ago and would be redeemed at par. Current market value of the bond exist 980 Interest on the term loan is 10% and the Mortgage is 9%. Required: Explain what is meant by the term "cost of capital'. Why is it important for a company to calculate its cost of capital correctly? Calculate the post-tax weighted average cost of capital for Carlton Ltd using the market valuation approach (show your workings)