Central Gas Ltd. is considering enhancing its production capacity. The following two mutually exclusive proposals are being considered: Proposal Proposal 11 Plant 200,000 300,000 Building 50,000 100,000 Installation 10,000 15,000 Working capital required 50,000 65,000 Annual earnings (before 70,000 95,000 depreciation) Sales promotion expenses 15,000 Scrap value of plant 10,000 15,000 Disposable value building 30,000 60,000 The life of the project is ten years. The sales promotion expenses of Proposal II will be incurred at the end of the year. These expenses have not been considered when calculating the annual earnings (given above). Required 1. Explain which proposal should be accepted given that the cost of capital of the firm is 8%. Use the NPV technique to answer this question. Ignore Taxation 2. Suppose the cost of capital of Gadget Company is 10%. If Gadget has a Capital structure that is 50% debt and 50% equity, It's before-tax cost of Debt is 5% and its marginal tax rate is 20%.Identify and analyses the cost of equity capital