Problem
Details of the capital structure of Vitamin Ltd. appear below:
Bonds Number issued 35,000
Coupon rate 5%
Interest payments semi-annually
Years to maturity 12
Current price $90
Preferred shares
Number issued 1.5 million.
Dividend per share $2
Current price $25
Common shares
Number issued 3.5 million
Next dividend per share $4
Dividend growth rate 6%
Current price $30
Flotation costs
Bonds 5%
Preference shares 6%
Common shares 7%
Task
The company's tax rate is 35%. Calculate the company's weighted average cost of capital.