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Use the following information for questions 8 to 11

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Use the following information for questions 8 to 11. Caracal Ltd. is comparing different capital

structures. The management of the company needs to compare the WACC of the different financing

options at its disposal. Specifically, there is a need to compare the WACC's of the two options it is

considering. The first option, is to borrow funds while the second option is to raise equity. The company

has a target D/E ratio of 0.45 which it intends to revert to as soon as possible, while its current D/E ratio

is 0.50. Currently, the company has a beta of 1.5. The tax rate is 28%, the risk free rate 7% and the

market risk premium, 6%. A very similar company recently issued bonds with a YTM of 10%. The

company has R15 000 in total assets, R5000 in total liabilities with a book cost of 5% and has R10 000 in

equity. The company currently has EBIT of R1000 which it expects to stay the same for the foreseeable

future. R5000 will be raised, either by debt or equity. If debt is raised, the company expects to issue

bonds at a market related YTM with a coupon rate of 10%. What would its WACC under the equity

option be?