Horizon View Bhd plans to invest a total of RM$35,000,000$ in capital projects next year.

The firm's present capital structure is as follows:

To finance the proposed capital projects, the firm is going to:

i$.$ Issue common stocks for RM$15$ per share. The dividend paid last year was

RM$0\mathrm{.}50$ per share and is expected to grow at a constant rate of $8\%$ a year. The

floatation cost is RM$2$ per share.

ii$.$ Issue a $10\%$ preferred stock for RM$130$ with RM$4$ issuance cost. The par value

of the preferred stock is RM$100.$

iii. Sell RM$1,000$ par value bonds with $15\%$ annual coupon rate and $8$ years

maturity period. The bond can be sold for RM$950$ each and floatation cost of

$4\%$ of the par value will be incurred.

The firm expects to have retained earnings at RM$10,000,000$ available for

capital expenditure next year. Tax rate is $28\%.$

Required:

a$.$ Calculate the cost of capital for:

i$.$ Debt.

ii$.$ Preferred stock.

iii. Internal common stock $($retained earnings$).$

iv$.$ External common stock $($new equity$)$

b$.$ Determine the maximum capital expenditure that can be carried out by Horizon

View Bhd if only retained earnings are used.

c$.$ Calculate the weighted average cost of capital $($WACC$)$ for the firm using

internal equity.

d$.$ Calculate the weighted average cost of capital $($WACC$)$ for the firm using

external equity.