You are an analyst who is estimating the cost of capital for Omnia Ltd. You have been provided with the following information:

Omnia Ltd has a long-term debenture currently on issue. The market value of this debenture is 105% of the current book value and the current effective market rate of equivalent debt is 12% p.a.

Omnia Ltd has an overdraft where interest is charged at a rate of 8% p.a. compounding semi-annually.

Omnia Ltd has two types of equity on issue: preference shares and ordinary shares. The preference shares have a current price of $2 and the ordinary shares have a current price of $5.30. It is estimated that 20% of the company's taxes are repaid to shareholders as franked dividends paid to the ordinary shareholders.

The beta of Omnia's ordinary shares is 1.5. The current risk-free rate is 5% and the estimated market return, including franking premium, is 12% p.a.

The company currently has a cash balance of $3,000,000.

The company's tax rate is 25%.

The capital structure of the company from its balance sheet is as follows:

Liabilities and Shareholder's Funds

Debentures $1,900,00 Overdraft $500,000 6.5% Preference Shares ($2.50 face value) $2,000,000 Ordinary shares ($3.50 face value) $3,500,000

Calculate the after-tax weighted average cost of capital (express as a decimal and round your answer to three decimal places).

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