TPA Ltd has the following capital structure.
60,000, 7% $100 debentures currently selling at $90.00 yielding 8% (semi-annual coupons).
Long term debt including a secured liability currently has a book value of $2,000,000. Interest is payable annually at a fixed rate of 10% p.a. which is also the current market rate for the secured liability.
200,000 ordinary shares, with a beta of 1.2. These shares have just paid a dividend of $0.80 which is expected to grow indefinitely at 5% pa.
The market risk premium is 10% and government risk-free bonds are paying 6%. If TPA faces a tax rate of 30% what is its Weighted Average Cost of Capital (WACC)? Round to 2 decimal places.