QUESTION FOUR Aerat Ltd feel that some of their older machines need replacing. Their present capital structure is as follows: 800 000 R2 ordinary shares now trading at R2,50 per share. 250 000 preference shares trading at R2 per share (issued at R3 per share). 10% fixed rate of interest. A bank loan of R 1 500 000 at 13% p.a. (payable in 5 years time). [2 Additional information: a. The company's beta is 1.3. The return on the market is 14% and the risk fr rate is 7%. b. Its current tax rate is 28%. c. Its current dividend is 40c per share and it expects its dividends to grow by p.a. Required: Assume that the company uses the Dividend Growth Model to calculate its cost of equity calculate the company's weighted average cost of capital.