(a)Wrennie's grandfather hadleft Wrennie a sum of RM83,000 for her undergraduate studies. The payment will be made available to her on her 18thbirthday. Wrennie has just turned 6 years old.

Before she turns 18 years old, her parents plan to deposit the sum of money with the OSK Trustee. Based on the past record, the OSK Trustee have been providing 4% per annum semi-annually. This rate of return is expected to continue for the foreseeable future.

Wrennie's parents plan to use the money inherited to cover the costs ofeducation and her living expenses. Upon Wrennie turning 18 years old, the OSK Trustee provides a return of 8% per annum paid monthly for the proceeds which was invested in a managed fund earlier.

Required:

i) Calculate the payment that Wrennie can expect to receive each month if she uses all the proceeds during the course of her five year of dentistry degree? (7 marks)

(b) Fanny Bhd is an all equity company in the steel industry. Last year, the company had paid a dividend of RM4 for 10 million shares issued at RM1 par value. The company estimated to pay a dividend payment of RM8 in eight years from today. The company expects the same rate of growth for foreseeable future. The company is reported a current market price of RM36.

Required:

i)Calculate the company's cost of capital using the Gordon's dividend growthmodel (7 marks)

(c) Debt financing offers a great advantage arising from the tax deductibility of interest expense. However, there are other costs involved. Critically discuss these costs.

d) Suppose that Emerail Bhd issued a bond with 12 years maturity, a face value of RM1,000 and a coupon rate of 7% (semi-annual compounding). The yield to maturity on this bond when it was issued was 8%.

Required:

(i) What was the price of this bond when it was issued? Explain whether the bond was traded at a discount, at par or at a premium?