FedY Berhad currents capital structure is as follows:

Property loan of RM1,000,000, paid in instalment of RM6,500 per months for the next 20 years.

Business Financing, RM800,000, for 9 years, instalment of RM12,628 per month.

Vehicles financing is RM240,000, monthly instalment of RM3,132 for 8 years.

The bond was sold for RM875 each with a maturity of 25 years.

The coupon rate is 4%, semi-annual. Outstanding issuance is 3,000 units.

The companys outstanding common stock is 3,000,000 units, and recently paid dividend of RM0.08 and is expected to do so indefinitely. Price of stock now is RM2.52 each, and the growth rate is 5%.

The company's preferred stock is sold for RM83.00 each, dividend is fixed at 7% at par value of RM100, with total outstanding issued stocks of 400,000 units.

The company wishes to increase the leverage by the following options:

Option 1

To issue additional 1,000,000 units of common stock. The price has been estimated to be at RM1.42, and the fee is 2% each. The expected dividend will be RM0.035 per share, and the growth rate is also at 5%.

Option 2

To undertake a loan of RM1.5 million, which will be paid monthly, RM21,425, for the next 10 years.

Required:

1. Calculate the cost of capital for the existing capital structure and the proposed structure.

2. Determine the wacc and adjusted wacc of the existing capital structure.

3. Determine the wacc and adjusted wacc of the new capital structure with Option 1.

4. Determine the wacc and adjusted wacc of the new capital structure with Option 2.

5. If the company wants to recall the bond, and replace it with Option 1, how that affect the companys adjusted wacc.

6. Given the cost of risk free rate instrument is 2.00%, and the average market cost is 7.5%. The companys beta is 1.4. Determine the companys cost of capital based on CAPM.