8) FINANCIAL MANAGEMENT Horizon View Bhd plans to invest a total of RM35,000,000 in capital projects next year. The firm's present capital structure is as follows: Debt 15% Preferred stock Equity 25% 60% i. ii. To finance the proposed capital projects, the firm is going to: iii. Issue common stocks for RM15 per share. The dividend paid last year was RM0.50 per share and is expected to grow at a constant rate of 8% a year. The floatation cost is RM2 per share. Issue a 10% preferred stock for RM130 with RM4 issuance cost. The par value of the preferred stock is RM100. Sell RM1,000 par value bonds with 15% annual coupon rate and 8 years maturity period. The bond can be sold for RM950 each and floatation cost of 4% of the par value will be incurred. The firm expects to have retained earnings at RM10,000,000 available for capital expenditure next year. Tax rate is 28%. a. i. ii. Required: Calculate the cost of capital for: Debt. Preferred stock. iii. Internal common stock (retained earnings). iv. b. C. d. External common stock (new equity) Determine the maximum capital expenditure that can be carried out by Horizon View Bhd if only retained earnings are used. Calculate the weighted average cost of capital (WACC) for the firm using internal equity. Calculate the weighted average cost of capital (WACC) for the firm using external equity. Page | 231