Ayuni Bhd. has the same business risk as Zombee Bhd and both have yearly earnings before interest and taxes (EBIT) of RM1.4 million. Ayuni Bhd. has RM4 million of debt outstanding at acost of 9%, whilst Zombee Bhd. which has cost of unlevered equity of 12% does not use any debt financing.

For each firm, calculate the following assuming that there are no taxes:

i. the value of the firm.

ii. the value of the firm's equity capital.

iii. the cost of equity.

iv. the weighted average cost of capital.

Assume that both Ayuni Bhd and Zombee Bhd have to pay corporate tax at the rate of 25%.

Recalculate the following for each firm:

i. the value of the firm.

ii. the value of the firm's equity capital.

iii. the cost of equity.

iv. the weighted average cost of capital.