Bingo Traders uses a combination of shares and debt in their capital structure. The details are given below: There are 8 000 000 R5 ordinary shares in issue and the current market price is R7.70 per share.

The latest dividend paid was 89 cents and a 11% average growth for the past eight years was maintained.

The company has 4 400 000 R5, 10% preference shares with a market price of R6 per share. Bingo Traders has a public traded debt with a face value of R14 000 000.

The coupon rate of the debenture is 10% and the current yield to maturity of 13%. The debenture has 6 years to maturity. They also have a bank overdraft of R6 000 000 due in 3 years time and interest is charged at 15% per annum.

Additional Information: Bingo Traders has a beta of 1.6, a risk-free rate of 7.1% and a return on the market of 17.7%. Company tax rate is 30%.

Required: 3.1 Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity. show all calculations