Rylstone Ltd has commenced operations with the following capital structure:

Rylstone Ltd
Liabilities and shareholder funds
Bonds	$ 300 000
Preference shares	$ 200 000
Ordinary shares	$ 500 000

Additional notes:

- The company is expected to pay a dividend of 10 cents per share in exactly one years time. Brokers anticipate that this dividend will continue to grow at a rate of 5 per cent per annum indefinitely.

- The shares are currently selling at $1.

- The required return on preference shares is 9%.

- The before-company-tax cost of debt is 8% per annum.

- The effective company income tax rate is 12%.

Required: Calculate the cost of capital for Rylstone.