2. The Finance Manager of Plaggio Ltd. believes that the cost of capital of a firm influences firm value and that it is very much related to the capital structure policy of a firm. The capital structure of a firm consists of debt and equity. To determine the cost of capital of the firm, he has collected the following information: i) The fim's capital structure comprises of 30 per cent debt and 70 per cent equity. ii) The fim has bonds outstanding with 20 years to maturity; 12 per cent annual coupon rate; face value of RM1,000; and the current bond price is RM 1,252 i) The firm uses Capital Asset Pricing Model (CAPM) to compute the cost of equity with the risk free rate at 2.5 per cent per annum, stock beta of 1.6 and market return of 12% per annum iv) The fim pays tax at a rate of 30 per cent. Required: (a) Determine the firm's after-tax cost of debt. Why is the after-tax cost of debt used in the computation of cost of debt and not the before-tax cost? (6 marks) (b) Compute the firm's cost of equity and its weighted average cost of capital (WACC) using the table approach (10 marks) (c) Explain any TWO (2) factors that are generally beyond a fim's control that could affect the firm's cost of capital. (4 marks) (d) Discuss any four methods of raising funds and discuss their advantages and disadvantages (20 marks)