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Question 4 Megaladon Ltd has identified two alternative capital structures: Structure 1: Equity of 80% of the value of the firm, with a return to shareholders of re = 18% and 16%. remainder financed by equity with shareholders requiring a return of re = 20%. Structure 2: Borrowings of 50% of the value of the firm paying a coupon rate of 18%, and the Mighty pays corporate taxes at the rate of 30%. Required: (a) (0) Calculate the weighted average cost of capital of each structure. (ii) Explain which structure Megaladon Ltd should adopt. (14 marks) (6 marks) (b) "Taxation is a consideration in the Capital Structure debate." Explain this comment with reference to the traditional and modernist theories on capital structure (30 marks) (Total 50 marks)