The capital structure of Orange Tradings (given in terms of both book value and market value) is

as follows

Bonds Preferred stock Common equityTotals

Book value $15,000,000 $2,000,000 $9,000,000$26,000,000

Market value $13,000,000 $2,500,000 $18,500,000$34,000,000

After-tax cost 7.0% 9.0% 14.0%

1. a) What is the weighted average cost of capital using both Book Value and Market Value calculations for Orange Tradings? (15Marks)

2. b) Orange Tradings is considering a project that costs N$320,000 where they would make a return of N$51,000. Would you advise the company to accept this project or not? Support your answer. (5 Marks)

3. c) What is theoretically the best weighting method that Orange Trading should use? Why? (5 Marks)