Question: Loki Company has 10 000 shares of ordinary shares outstanding at a market price of R55 a share. The firm also has a bond issue

Loki Company has 10 000 shares of ordinary shares outstanding at a market price of R55 a share. The firm also has a bond issue outstanding with a total face value of R250 000 which is selling for 105 per cent of face value. The cost of equity is 11 per cent while the pre-tax cost of debt is 8 per cent. The firm has a beta of 1,1 and a tax rate of 34 per cent. What is Loki's weighted average cost of capital?

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