You are the financial manager of a firm that wants an evaluation of the financing decision in respect of a need to raise additional capital to expand business practices.

The following information has been made available to you:

500 000 ordinary shares were issued 5 years ago at R10 per share. The current market price is R15. The previous dividend paid was R5 and the next expected dividend is R7.50. The growth rate is 6%.

250 000 10% preference shares were issued 3 years ago at R5 per share. The current market price is R10.

A 20% long-term loan was taken out 6 years ago for R750 000. R250 000 of the loan has been repaid.

The company has a tax rate of 28%.

Source: Hunde, T. (2022)

Required

Using the book values, calculate the weighted average cost of capital (20 Marks)