All Grain Ltd wants to invest in a gym and wants to raise additional capital. The company's current capital structure consist of the following:

* Ordinary shares (100 million shares issued) at a market price of R3 per share

• 11% preference shares shares with a par value of R100 and market price of R110 per share (1million preference shares issued)
• 1 million 10% debentures with a nominal value of R100 but trading at R90. The pre tax yield is at 12% per annum. The bonds mature in 7 years time,
• The following data should be used in the calculation of cost of equity: yield on government bonds = 9%, market risk premium = 5%, beta = 1.2
• The company is subject to 28% income tax.

Required:

What is the company's current Weighted Average Cost of Capital.

Answer rating: 100% (QA)

To calculate the Weighted Average Cost of Capital WACC for All Grain Ltd well need to find the indiv... View the full answer