Bingo Traders uses a combination of shares and debt in their capital structure.

The detail 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 4000 000 R, 10% preferences shares with a market price of R6 per share.

Bingo Traders has a public traded debt with the 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 years to maturity.

They also have an bank overdraft of R6 000 000 due in 3 years time and interest id charged at 15% per annum.

Additional Information

Bingo Traders has BETA OF 1.a risk-free rate of 7.1% and the return on the market of 17.7%

Company tax rate is 30%.

Calculate the weighted average cost of capital, using the Capital Asset Pricing Model to calculate the cost of equity.

Calculate the cost of equity, using the Gordon Growth Model.