COST OF CAPITAL Capital is necessary element in production, and its cost play an important role in capital budgeting. The cost of capital acts as a hurdle rate set forth the minimum rate of return that is acceptable from any investment EXERCISE 6 Suzy Perfume Company's capital structure has 50 percent common equity, 10 percent preferred stock, and 40 percent debt. Suzy Perfume can sell new securities at the following costs: Cost before tax (%) 4 Debt Range of financing First RM1 million RM1.01 million-RM4 million More than RM4 million 6 7.5 Cost (%) Preferred stock Range of financing First RM2 million More than RM2 million 8 10 Cost (%) Common stock Range of financing First RM5 million More than RM5 million 11.9 12.6 Given the corporate tax rate is 25%. i) Calculate the after tax cost of debt, the breaking points, and the weighted average cost of capital (WACC). SITI RAHAYU BELI/FPP/UITM SABAH Page 13