3 (a) What role does the cost of capital play in the firm's long-term investment decisions? How does it relate to the firm's ability to maximize sharcholder wealth? ( (b) Chelsen Fashions is expected to pay an annual dividend of RM0,80 a share next year. The market price of the stock is RM22.40 and the growth rate is 5 percent. Determine the firm's cost of equity. ( (c) A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of Capital Long-term debt Preferred stock Common stock equity Target Market Proportions 30% 5% 65 Debt: The firm can sell a 20-year, RM1,000 par value, 9 percent bond for RM980. A flotation cost of 2 percent of the face value would be required in addition to the discount of RM20. Preferred Stock: The firm has determined it can issue preferred stock at RM65 per share par value. The stock will pay an RM8.00 annual dividend. The cost of issuing and selling the stock is RM3 per share. Common Stock: The firm's common stock is currently selling for RM40 per share. The dividend expected to be paid at the end of the coming year is RM5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was RM3.45. It is expected that to sell, a new common stock issue must be underpriced at RM1 per share and the firm must pay RM1 per share in flotation costs. Additionally, the firm's marginal tax rate is 40 percent. Required: Determine the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings. (d) Justify the reason why the after-tax cost of debt rather than the before-tax cost is used to calculate the weightage average cost of capital