DHH Bhd is a successful logistics services firm in Kuala Lumpur that currently earns RM 155 million before interest and taxes each year with no risk. Assume that DHH Bhd's corporate tax is 25%. The firm capital expenditure equals depreciation expenses each year and it will have no changes to its net working capital. The 3-month treasury bills is at 4%.

a) assume that DHH Bhd has no debt and pays out its net income as dividend each year. compute value of DHH Bhd equity

b) assume that DHH makes an interest payment of RM 45million per year - what is the value of firm equity ? - what is the value of firm debt ?

c) what is the difference between total value of firm with and without leverage ?

d)to what percentage value of debt is difference from part (c) equal ?

e)now assume that DHH has no debt and WACC of 9.2%. The average debt-to-value ratio for the logistic industry is 5%. Compute the DHH Bhd cost of equity if it took on average amount of debt for the industry at the cost of debt of 6%.