Answer ALL questions below:

QUESTION 1:

Mega Berhad is issuing three types of securities to finance new business projects.The corporate tax rate is 26% and the details of the securities issued are as follows:

Common

Stocks

Preferred

Stocks

Debts

Cost of Capital

10%

6%

8%

No. ofunits outstanding

150,000

40,000

10,000

Market price

RM12

RM11

95% of par

Based on the above information, calculate the Weighted Average Cost of Capital (WACC). (12 marks)

QUESTION 2

Suria Berhad issued three securities as follows:

Types of securities

Cost of capital (%)

Total Funds (RM)

Bond

7

15,000

Stock

14

50,000

Preferred stock

5.5

7,500

Compute weight (X) of each security. (4 marks)

If the corporate tax rate is 26%, calculate the weighted average cost of capital (WACC). (3 marks)

QUESTION 3:

The current shareholder's equity capital account for Orchid Berhad is presented below:

RM

Common stock (RM1 par value)

20,000

Capital surplus

200,000

Retained earnings

580,000

Total shareholder's equity

800,000

If the company declares a three for one stock split, calculate the:

new par value per share. (2 marks)

new number of shares outstanding. (2 marks)

Based on answer in part (a), show how the shareholder's equity account would

change after the stock split. (2 marks)

QUESTION 4

Extend Berhad is a construction company currently sells it stock at RM20 a share.This company declared a 15% stock dividend.The current shareholder's equity capital account for Extend Berhad is presented below:

RM

Common stock (RM1 par value)

15,000

Capital surplus

250,000

Retained earnings

655,000

Total shareholder's equity

920,000

Calculate:

number of stock dividend. (2 marks)

total number of share outstanding after the stock dividend declared. (2m)

new capital surplus. (2 marks)

new retained earnings. (2 marks)

Based on answer in part (c), show how the shareholder's equity account would change. (2 marks)