Weighted Average Cost os Capital, Corporate Finance

Weighted Average Cost os Capital, Corporate Finance

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Motown Manufacturers are involved in the manufacturing of zips, buttons and sewing needles. they need to automate their plant (at a cost of R1 100 000) as a result of a sharp increase in cost of labour due to intermittent industrial action by labouur unions and the increasing labour cost. as their management accountant, you have been tasked to calculate their cost of capital. information is as follow:
- 1.8 million R1 ordinary shares trading at R2.20 per share
- 700 000 11\5 R2 preference shares, currently trading at R1.80 per share
- Debentures initially sold for R800 000, at 13% interest per annum, payable in 8 years

additional information:
-tha company has beta factor 1.35 and a risk free rate 9%
-tax rate 30% and return on market is 13%

current dividend paid on ordinary shares is 70c per share and a growth rate of 9% is maintained.
calculate WACC using CAPM

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