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Smart Ltd has the following balance sheet structure: v Assets Liabilities and Equity Assets $1000 Debt $300 Equity $700 Total $1000 $1000 Smart Ltd's debtholders require a return of 9% and shareholders require a return of 11%. Ignore tax rates. Mr Very Smart, the CEO of Smart Ltd tells the Board of Smart Ltd that shareholders require a very high return, it's cheaper to use debt to fund our projects. We should therefore raise debt and reduce our equity holdings. This will increase our returns Required: 1. Calculate the weighted average cost of capital for Smart Ltd. 1 mark. 2. Justify Mr Very Smart's advice to the Board of Smart Ltd: 3 marks