10 8 QUESTION 13 Anggerik Bhd is going to issue new bond and ordinary shares to raise funds as it wants to invest in several capital projects costing RM 20,000,000. The company's present debt and equity as at 31 December 2019 are as follows: RM Bonds at par 40,000,000 Preference shares 10,000,000 Ordinary shares af par 40,000,000 Share premium 2,000,000 Retained earnings 8,000,000 Total 100,000,000 The financial analyst has analyzed the current market condition and information on the bond, preference shares and ordinary shares is as follow: Per Value (RM) Interest Dividend Market Price (RM) Payout (%) Bond (10 years, maturity) 1,000 940 Ordinary shares 1 60 10 Preference shares 100 95 The company has just paid dividend to ordinary stockholders of RM 0.60 per share. The dividend is assumed to grow at a constant rate of 10% and the flotation cost on the issuance of the ordinary shares is 5% of the market price. The flotation cost on new preference shares is 3% of the par value. The company is willing to share RM 5 million of the retained earnings for capital investment this year. The corporate tax rate is 25%. Required: (a) Assuming the company fully utilizes its available ratained earnings to finance the various projects before issuing new shares, determine the number of bonds, preference shares and new ordinary shares to be issued to finance the projects. (b) Calculating the following: (1) The after-tax cost of bond (ii) The cost of preference shares (iii) The cost of internal equity (iv) The cost of new ordinary shares (c) Determine the maximum capital expenditure that can be undertaken by Anggerik Bhd without issusing new shares. (d) Determine the WACC if the company plans to undertake the projects costing RM 20,000,000. (e) Beriefly explain three factors that determine a firm's cost of capital