answer iv and v

Crombie Corp. wants to issue bonds with a 9% coupon rate, a face value of RM1,000, and 12 years to maturity. Crombie estimates that the bonds will sell for RM1,090 and that flotation costs will equal RM15 per bond. Crombie Corp. common stock currently sells for RM30 per share. Crombie can sell additional shares by incurring flotation costs of RM3 per share. Crombie paid a dividend yesterday of RM4.00 per share and expects the dividend to grow at a constant rate of 5% per year. Crombie also expects to have RM12 million of retained earnings available for use in capital budgeting projects during the coming year. Crombie's capital structure is 40% debt and 60% common equity. Crombie's marginal tax rate is 35%. At the same time, Crombie is considering the following projects to invest: i. Calculate the after-tax cost of debt assuming Crombie's bonds are its only debt. (3) ii. Calculate the cost of retained earnings. (2) iii. Calculate the cost of new common stock. (2) iv. Calculate the weighted average cost of capital. (2) v. Calculate the weighted marginal cost of capital. (2) vi. Create the investment opportunity schedule and draw the cost of capital curve, and make decision on which project/s to be accepted. (4) Crombie Corp. wants to issue bonds with a 9% coupon rate, a face value of RM1,000, and 12 years to maturity. Crombie estimates that the bonds will sell for RM1,090 and that flotation costs will equal RM15 per bond. Crombie Corp. common stock currently sells for RM30 per share. Crombie can sell additional shares by incurring flotation costs of RM3 per share. Crombie paid a dividend yesterday of RM4.00 per share and expects the dividend to grow at a constant rate of 5% per year. Crombie also expects to have RM12 million of retained earnings available for use in capital budgeting projects during the coming year. Crombie's capital structure is 40% debt and 60% common equity. Crombie's marginal tax rate is 35%. At the same time, Crombie is considering the following projects to invest: i. Calculate the after-tax cost of debt assuming Crombie's bonds are its only debt. (3) ii. Calculate the cost of retained earnings. (2) iii. Calculate the cost of new common stock. (2) iv. Calculate the weighted average cost of capital. (2) v. Calculate the weighted marginal cost of capital. (2) vi. Create the investment opportunity schedule and draw the cost of capital curve, and make decision on which project/s to be accepted. (4)