Honky Tools Company sells a wide assortment of tools for plumbers and painters through 8 retail stores located in Penang. Because of net losses in the past few years, the company has not been an income tax payer. It currently has RM20 million of debt outstanding and RM15 million of equity capital in its capital structure. Cost of debt currently is 8.75 percent and it has a cost of equity of 30 percent. [Syarikat Honky Tools menjual pelbagai jenis alatan untuk tukang paip dan tukang cat melalui 8 kedai runcit yang terletak di Pulau Pinang. Kerana kerugian bersih pada tahun tahun kebelakangan, syarikat ini telah tidak membayar cukai pendapatan. Ia kini mempunyai RM20 juta daripada hutang tertunggak dan RM15 juta modal ekuiti dalam struktur modal. Kos hutang kini adalah 8.75 peratus dan ia mempunyai kos ekuiti 30 peratus.]

(i) Calculate the change in its Weighted Average Cost of Capital (WACC) if Honky Tools Company becomes an income tax payer and its marginal income tax rate increase to 39 percent. [Kirakan perubahan kepada Kos Purata Wajaran Modal (WACC) jika Syarikat Honky Tools menjadi pembayar cukai pendapatan dan kenaikan kadar cukai pendapatan marginal kepada 39 peratus.]

(6 Marks / Markah) (ii) Explain TWO (2) reasons that the Weighted Average Cost of Capital (WACC) is an important measurement for management to know. [Terangkan DUA (2) sebab Kos Purata Wajaran Modal (WACC) adalah merupakan ukuran penting untuk pengetahuan pihak pengurusan.]

(4 Marks / Markah)

(iii) Justify factors that affect the Weighted Average Cost of Capital (WACC) in terms of that management has no control over and management has some control over. [Justifikasikan factor-faktor yang mempengaruhi Kos Purata Wajaran Modal (WACC) dari segi pengurusan yang tidak mempunyai kawalan dan pengurusan yang mempunyai beberapa kawalan.]