As per the Net Income Approach, the firm will have the maximum value of capital structure at a point where WACC (Ko) is minimized. The optimal capital structure is one at which the WACC, (Ko), is minimum resulting in the maximum value of the firm. As per the NI approach, a firms market value of the Equity Share Capital is OMR 320,000; Earnings Available to Equity Shareholders OMR 50,000 and EBIT is OMR 80,000.

You are required to determine what would be the cost of Equity (Ke) and overall cost of capital (Ko) under Net Income Approach. Assume the coupon rate of bond is 10%.