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International Foods Limited has the following capital structure:
| | Book Value | Market Value |
| Equity Capital (25,000 shares of $10 each) | 250,000 | 450,000 |
| 13% Preference capital (500 shares of $100 each) | 50,000 | 45,000 |
| Reserves and Surplus | 150,000 | 0 |
| 12% Debentures (1500 debentures of $100 each) | 150,000 | 145,000 |
| | 600,000 | 640,000 |
The expected dividend per share is $1.40 and the dividend per share is expected to grow at a rate of 8% forever.
You are required to compute the weighted average cost of capital for the existing capital structure using book values and market values as weights.
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