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Debt: Pharma Berhad's bond with a coupon rate of 8 % is currently selling at par value. Preferred Stock: The company has 2 million 1

Debt: Pharma Berhad's bond with a coupon rate of 8% is currently selling at par value.
Preferred Stock: The company has 2 million 14% Preferred stocks at a par value RM1.00.
The stock current price is RM1.25.
Common Stock: Pharma Berhad's common stock is currently selling for RM18 per share.
The dividend expected to be paid next year is RM1.74. The floatation cost for new common
stock will amount to RM2 per share. The dividend is expected to grow at a 6 percent rate
into the future.
The marginal corporate tax rate is 28%.
Required:
a. Calculate the after-tax cost of debt for Pharma Berhad.
b. Calculate the cost of preferred stock for Pharma Berhad.
c. Calculate the cost of retained earnings for the company.
d. Calculate the cost of new common stock for the company.
e. Compute the after-tax weighted average cost of capital, assuming there is not new issue
of common stock.
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