Assume you've been recently hired as the financial analyst of Company D Ltd, which was recently formed to manufacture the new product. It has the following capital structure:
Common Stock of N$100 each N$ 40,000
7% Bonds of N$100 each N$ 25,000
9% Preferred Stock of N$100 each N$ 25,000
Retained Earnings N$ 10,000
Total N$ 1 00,000
The Company has earned N$ 20 per share on common stock. The tax rate is 50% and the shareholders' personal tax bracket is 25%. Calculate the weighted average cost of capital.