Calculate de weighted average cost of capital (WACC) for the company?

Detailed forecasts of the product鈥檚 expected cash flow have been made. It is estimated that an initial capital investment of $5.2 million is required.
The company鈥檚 authorized share capital consists of 6 million ordinary shares, each with a nominal value of 50 cents. During the last five years the shares in issue has remained constant at 3 million, and the market price per share is 135 cents ex div. The dividend paid in December 2006 was 16 cents per share, with a constant growth of 7% per annum.

The company has 1 million 12%, 25 cents preference in issue, with a market price of 75 cents per share. It also has $800 000, 8% debentures, redeemable in four years鈥?time with a current yield-to-maturity of 11%.
The company also has outstanding a $500 000 bank loan repayable in eight years鈥?time. The rate of interest on this loan is fixed at 1.5% above the bank鈥?base rate which is currently at 12.5%
The company鈥檚 tax rate is 30%.

Calculate the WACC

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation.

WACC is calculated by multiplying the cost of each capital component by its proportional weight and then summing:

WACC = E D
__ * Re + __ * Rd * (1 - Tc)

V V


Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V = E + D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

Broadly speaking, a company鈥檚 assets are financed by either debt or equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

A firm's WACC is the overall required return on the firm as a whole and, as such, it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers. It is the appropriate discount rate to use for cash flows with risk that is similar to that of the overall firm.

Sorry, the calculation formula doesn't print out the way I typed it in the window. It should show E/V and D/V.