Vijay Ltd. has got to have the following capital structure: 

Rs. 

Ordinary share capital  60, 00,000 8% 

Preference Shares       10, 00,000 

Free reserves               35, 00,000 9 1⁄2% 

Debentures                    5, 00,000 

Total                          1,10, 00,000 

In addition to above, the bankers has sanctioned a cash credit limit of Rs. 10,00,000 with interest chargeable @ 10% per annum with the condition that in case the company fails to utilise the cash credit limit in full, bank would recover commitment charges @ 8%. The cash credit limit as such could be utilized on an average to the extent of 80% only. 

Among other obligations, the company has to ensure – 

i. Payment of all interest; 

ii. Dividend pay – out ratio of 60%; 

iii. Dividend of 12% to equity shareholders. 

You are required to calculate company's overall rate of return on capital employed assuming income – tax rate to be 35%. Also indicate cost of capital after tax.