Calculate the weighted average cost of capital of capstone

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Capstone Ltd plans to raise new capital for a copper mine in South Australia. The company will issue debt and equity instruments to fund for the project. The company's CFO has asked you to calculate the weighted average cost of capital for the company.

The company intends to issue 10 years bonds that will pay 9% annual coupon with a total face value of $40,000,000 and a yield to maturity of 9% p.a. Capstone will also issue 1,500,000 shares at a price of $40 per share. Capstone equity has a beta of 1.22 and you determine that the risk free rate is 2.5% while the market is providing 10% return. The relevant corporate tax rate is 30%.

Using the three step process calculate the weighted average cost of capital of Capstone Ltd. (Show all calculations, show final answer correct to two decimal places.)

Reference no: EM133206068

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