A Race Bhd is a company specializes in manufacturing electronic products. The company's return on net operating assets (RNOA) is 10% with an effective tax rate of 25%. Its net operating assets (NOA) is RM20 million and entirely financed by common shareholders' equity. The company is considering purchasing a new equipment costing RM6 million to cope with the increasing demands of the company's products. The RNOA is expected to increase by 2% if the plan is implemented. The old equipment which was purchased 3 years ago at a price of RM4 million is expected to be sold at a price of RM1 million and the proceeds can be used to partly finance the cost of the new equipment. The accumulated depreciation of the old equipment is RM3 million. There are two options available to finance the remaining cost of the new equipment Option 1: To issue 4 million units of common stock at a price of RM1.25 per share. Option 2: To acquire RM5 million long-term loans from Hebat Bank with a coupon rate of 8% per annum. Required: Calculate: i. ii. Net operating income after tax (NOPAT) for both options. (4 marks) Net income for each financing option. [Start your answers with Net Operating Profit before Tax (NOPBT)). (6 marks) Return on common equity (ROCE) for each financing option by using ending equity approach. (4 marks) The impact of leverage in Option 2 between return on common equity (ROCE) and return on net operating asset (RNOA). (2 marks) iv