Cost of capital represents the overall cost of financing to the firm. Explain cost of capital and discuss the importance of understanding cost of capital.

Company ABC Ltd. has the following sources of capital and has also determined its individual cost of capital:

Sources of Capital/Financing	RM	Cost of Capital
Bonds	300,000	10%
Preferred stock	100,000	13%
Common stock	600,000	16%

The management intends to invest in a RM500,000 investment project with an expected rate of return of 12.5%. Should the firm make the investment? Comment based on your calculation. (Hint: show your calculation in table format.)