The following information has been extracted from the 2017 Balance Sheet of

Grand Leisure Ltd.

	$000s
Paid up capital- 2 million shares	4,000
Retained earnings	500
9% debenture (maturing November 2025)	300
Trade creditors	400
Bank overdraft	300

• Leisure paid a total of $800,000 in dividends this year. It is expected that dividends will grow at 5% per annum, in perpetuity. Ordinary dividends are fully franked.

• Grand Leisures market capitalisation is $6,400,000

• The debentures were issued at par in 2015, giving the company proceeds of $100 each. The current market value of each debenture is $107. Coupons are paid semi-annually. The November 2017 coupon has already been paid (Hint: 8 years remaining life).

• The current bank overdraft rate is 9% per annum, compounded daily. The current level of overdraft is seen as a permanent source of funds.

• The corporate tax rate is 30%, and it has been estimated that the franking credit utilisation rate is 40%.

• Current market value of capital is representative of target capital structure.

• Minimal retained earnings are available for investment. It is estimated that floatation costs for ordinary capital would amount to $0.20 per share

Calculate the weighted average cost of capital (WACC) for Grand Leisure Ltd.