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

There are 8 000 000 R5 ordinary shares issue and the current market price is R7.70 per share. The latest dividend paid was 89 cents and a 11 percent average growth for the past eight years was maintained The company has 4 4000 000 R5 , 10 percent preferences share 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 percenr and the current yield to maturity of 13 percent . Th debenture has 6 years to maturity.

They also have bank overdraft of R6 000 000 due in 3 years time and the interest is charged at 15 percent per annum.

Additional information:

Bingo Traders has beta of 1.6 , a risk free rate of 7.1 percent and a return on the market of 17.7 percent.

Company tax rate is 30 percent.

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 Gordon Growth model.