Helao Limited (HL) wants to replace their aging fleet. They think the old fleet is costing too much in repairs and maintenance and therefore would want a new fleet to reduce costs. They consider this fleet replacement a project and therefore they would like to know the cost of capital to use to assess the viability of the fleet replacement project. Their present capital structure is as follows: 600 000 N$2 ordinary shares now trading at N$2.40 per share. 200 000 10% N$3 preference shares trading at N$2.50 per share A bank loan of N$ 1 000 000 at 12% p.a. (payable in 5 years time). Additional information The companys beta is 1.4. The return on the market is 15% and the risk free rate is 6%. Its current tax rate is 28%. Its current dividend is 50c per share and it expects its dividends to grow by 7% p.a.

Calculate HLs weighted average cost of capital using both methods of determining cost of equity.